Early market roundup: Stocks down as US-Iran talks postponed; oil up

The price of Brent oil was higher while London stock prices opened lower on Friday, following news that Andy Burnham won the Makerfield by-election, while planned follow-up talks on the US-Iran agreement have been postponed.

The FTSE 100 index opened down 4.48 points, marginally lower, at 10,395.22. The FTSE 250 was down 46.80 points, 0.2%, at 23,283.92, and the AIM all-share was down 1.71 points, 0.2%, at 798.33.

The Cboe UK 100 was marginally higher at 1,031.97, the Cboe UK 250 was down 0.2% at 19,934.67, and the Cboe small companies was up 0.3% at 18,458.78.

UK gilt yields moved higher, broadly in line with wider European fixed-income markets, amid a combination of political developments, oil price moves, and renewed expectations for further Bank of England tightening.

Labour’s Andy Burnham won the Makerfield by-election with 55% of the vote, defeating Reform UK’s Robert Kenyon by more than 9,000 votes and paving the way for a potential challenge to Prime Minister Keir Starmer’s leadership.

Burnham has previously unsettled markets with comments suggesting Labour should ‘get beyond this thing of being in hock to the bond markets’, although he has since reiterated support for Chancellor Rachel Reeves’ fiscal rules aimed at reducing borrowing over time.

The result came as official figures showed UK public sector net borrowing rose more than expected in May.

Government borrowing totalled £23.3 billion, up 30% from £17.9 billion a year earlier and £5.6 billion above the Office for Budget Responsibility’s forecast. Borrowing in the first two months of the 2026-27 financial year reached £46.3 billion, exceeding forecasts by £7.7 billion.

Debt interest payments climbed 54% to a record May high of £11.7 billion, while public sector net debt stood at 95.1% of gross domestic product. The current budget deficit totalled £18.5 billion in May and £34.5 billion in the financial year to date.

Offsetting some concerns, separate data from the Office for National Statistics showed UK retail sales rebounded in May.

Retail sales volumes rose 1.2% month-on-month, comfortably ahead of expectations and reversing a revised 1.0% fall in April. Sales volumes increased 0.4% in the three months to May compared with the previous three-month period.

The pound was quoted at $1.3194 early Friday, lower than $1.3246 at the London equities close on Thursday. Against the euro, sterling fell to €1.1524 from €1.1541 a day prior.

The euro traded at $1.1444 early Friday, lower than $1.1477 late Thursday. Against the yen, the dollar was quoted at JP¥161.34, higher from JP¥160.99.

In European equities on Friday, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was also up 0.2%.

In Germany, producer price inflation was softer than expected in May. Producer prices rose 0.3% month-on-month, slowing from 1.2% growth in April and undershooting expectations for a 0.7% increase.

On an annual basis, producer prices accelerated to 2.2% from 1.7%, though again came in below forecasts of 2.5%. Energy prices remained elevated due to the US-Iran conflict, rising 2.5% annually, although they fell 0.4% from April levels. Mineral oil prices surged nearly 35% from a year earlier but declined 2.5% month-on-month.

On the geopolitical front, planned follow-up talks on the US-Iran agreement have been postponed, according to Switzerland’s foreign ministry.

The discussions, which were expected to begin a 60-day period of negotiations on Iran’s nuclear programme and other issues, had been due to take place after this week’s accord aimed at reopening the Strait of Hormuz and ending the conflict.

The postponement came after US Vice President JD Vance cancelled a planned trip to Switzerland. The White House said the logistics of the negotiations remained complex and unpredictable.

Iranian media also reported that no Iranian delegation trip had yet been confirmed.

Brent oil was quoted at $80.17 a barrel early in London on Friday, higher than $77.04 late Thursday.

Back in London, defence stocks were among the strongest performers. Babcock rose 2.1%, while BAE Systems added 1.0%.

At the other end of the FTSE 100, Admiral fell 4.7% after RBC cut the insurer to ’sector perform’ from ’outperform’.

Barratt Redrow slipped 0.5% after appointing former Britvic finance chief Rebecca Napier as chief financial officer and executive director with effect from August 3. Napier previously held senior finance roles at IAG, including chief financial officer of British Airways.

On the FTSE 250, PPHE Hotel Group dropped 11%.

The company said a £22.00-per-share takeover proposal from Fattal Hotel Group was no longer deliverable after major shareholder Euro Plaza Holdings, which owns around one-third of PPHE, opposed the offer. PPHE added that a separate indicative proposal received on May 31 remains under preliminary assessment as part of its ongoing strategic review.

Among smaller caps, Sunda Energy slumped 37% after receiving a production sharing contract termination notice related to a missed Chuditch-2 drilling deadline.

Union Jack Oil fell 19% after saying the Crossroads well has been deemed non-commercial following testing and will now be plugged and abandoned.

In Asia on Friday, the Nikkei 225 index in Tokyo closed up 0.3%.

Markets in mainland China and Hong Kong were closed for public holidays marking the Dragon Boat Festival and Tuen Ng Day respectively.

The S&P/ASX 200 in Sydney closed down 0.9%.

US financial markets are closed on Friday for the Juneteenth holiday.

Gold was quoted at $4,153.50 an ounce early Friday, down from $4,230.61 on Thursday.

Still to come on Friday’s economic calendar is Canadian retail sales data.

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