FTSE 100 Slips as Middle East Tensions Overshadow Strong UK GDP Data

London's FTSE 100 index declined on Thursday morning as escalating geopolitical tensions in the Middle East prompted a risk-off sentiment that overshadowed official data showing the UK economy grew faster than expected. As of 07:25 GMT, the blue-chip index was down 0.37%, while Germany’s DAX and France’s CAC 40 fell by 0.22% and 0.21%, respectively.

Geopolitical Overhang Hits Markets

Investor sentiment soured following an escalation in the standoff between the United States and Iran. Iran's military warned it would strike regional infrastructure in response to U.S. threats, followed by reports of U.S. strikes near Tehran and Iranian retaliatory attacks on targets in Bahrain, Jordan, and Kuwait. The conflict has directly impacted global trade, with traffic through the critical Strait of Hormuz slowing significantly, according to a note from Jefferies.

Strategists at Jefferies warned clients that the standoff could persist for "a few weeks," maintaining upward pressure on oil prices. Brent crude, the international benchmark, was last trading at $84.63 a barrel. The risk-averse mood also impacted sterling, which edged down 0.01% against the dollar to $1.3535.

UK Economy Shows Unexpected Strength

Despite the negative market reaction, domestic economic data pointed to resilience. The Office for National Statistics (ONS) reported Thursday that the UK economy grew by 0.7% in the three months to May, comfortably beating forecasts of 0.5%. This marks the fastest pace of annual growth in 13 months at 1.3%.

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The expansion was driven by a 0.3% rise in the services sector, which helped monthly GDP rebound by 0.1% in May after a 0.1% contraction in April. However, the positive economic signal was not enough to counter the broader global uncertainty weighing on equities.

Corporate Movers

Several UK-listed companies saw significant share price movements on Thursday following corporate updates:

• Ocado (OCDO) shares plunged 15.4% even as the online grocer maintained its forecast to turn cash flow positive, with investors reacting to weaker underlying first-half earnings.
• Crest Nicholson (CRST) fell 9.1% after the housebuilder said it expects full-year operating profit to be at the lower end of its £5 million to £15 million guidance range, citing weak housing demand.
• Frasers Group (FRAS) shares were down 4.9% after the retailer withheld its fiscal 2027 outlook, pointing to uncertainty from its ongoing takeover bids.
• In contrast, oil major TotalEnergies (TTEF) said it expects higher oil and gas prices driven by the Middle East conflict to boost its second-quarter profits.