UK equities slip as Middle East impasse drives oil higher
Market Reaction and Key Developments
June 3 (Reuters) - UK shares declined on Wednesday as hostilities in the Middle East flared up again, sending crude oil prices higher and dampening hopes for a peace deal between the U.S. and Iran.
The blue-chip FTSE 100 fell 0.4%, while the midcap FTSE 250 was down 0.8%. Both indexes have been largely range-bound this week as investors weighed developments in the Middle East and large swings in global tech shares.
Middle East Tensions and Oil Prices
• Iranian attacks damaged Kuwait's airport and injured dozens, while the U.S. military carried out strikes near the Strait of Hormuz, as talks to halt the war showed little sign of progress.
• Oil prices rose around 2%, sending shares of UK energy firms 1.6% higher.
Impact on UK Services and Inflation
• British services firms suffered a small fall in activity in May as the strains of the Iran war pushed costs up sharply and hit optimism, an S&P Global survey showed.
• The S&P Global Purchasing Managers' Index's gauge for input cost inflation fell slightly in May but was still the second-highest since December 2022.
Bank of England and Financial Sector Moves
• Financial markets see a nearly 90% chance for the Bank of England to maintain borrowing costs at 3.75% in its June 18 announcement, according to LSEG data.
• British private equity firm Bridgepoint Group fell 9.8% after Switzerland's Partners Group said it was capping withdrawals from an $8.6 billion private equity fund.
• Investment manager Ninety One fell 4.6% after analysts noted smaller-than-expected net inflows during the second half of fiscal 2026.
Retail Sector Highlights
• Shares of B&M jumped 16.1% after the British discount retailer reported a smaller-than-expected drop in annual pretax profit.
• Debenhams Group jumped 14.4% after the online fashion retailer returned to growth with a 0.5% rise in first-quarter gross merchandise value along with a "substantial" increase in core profit.
Reporting Credits
(Reporting by Shashwat Chauhan and Sruthi Shankar in Bengaluru; Editing by Shailesh Kuber and Jonathan Ananda)
