UK markets moved lower on Friday as investors reacted to growing political uncertainty surrounding Prime Minister Keir Starmer and renewed concerns over inflation driven by rising oil prices.
The FTSE 100 fell 1.2%, putting the benchmark on course to end a two-day winning streak, while the FTSE 250 declined 1.22%.
Investor attention shifted sharply after Andy Burnham indicated he would seek to contest a parliamentary seat becoming vacant following a colleague’s resignation, a move widely interpreted as positioning himself for a possible future leadership challenge within the Labour Party.
Markets are concerned that Burnham’s more interventionist economic approach — described by some analysts as “business-friendly socialism” — could result in higher public spending and borrowing at a time when UK public finances are already under pressure.
Russ Mould of AJ Bell said a leadership contest involving Burnham could prolong political instability and add to uncertainty surrounding the UK’s economic outlook.
The political pressure on Starmer intensified after Labour’s disappointing local election performance, while former health secretary Wes Streeting is also reportedly considering a leadership bid if a formal contest emerges.
At the same time, geopolitical tensions in the Middle East added further pressure to markets after U.S. President Donald Trump warned that his patience with Iran was “running out,” raising fears of further escalation.
Brent crude prices climbed more than 2.6% to above $108 a barrel. As a major energy importer, the UK is seen as particularly vulnerable to prolonged disruption in the Strait of Hormuz, with investors increasingly worried that sustained high oil prices could fuel inflation and complicate the Bank of England’s interest rate outlook.
