London’s benchmark index slipped at the start of the third quarter as investors balanced geopolitical risk, inflation concerns, and key economic data releases.
The FTSE 100 fell 0.29% in early trading on Wednesday, while Germany’s DAX eased 0.03% and France’s CAC 40 declined a sharper 0.49%.
Sterling also came under pressure, with GBP/USD falling 0.23% to 1.3232 against the US dollar during the session.
Diplomatic activity in Doha drew investor attention, with Qatar’s Prime Minister meeting US envoys Steve Witkoff and Jared Kushner alongside Iranian negotiators for technical discussions.
Qatar’s foreign ministry described the talks as taking place “whether direct or indirect,” underscoring the tentative nature of the ongoing negotiations between Washington and Tehran.
Iran’s chief negotiator, Mohammad Bagher Ghalibaf, described the Strait of Hormuz as Tehran’s “greatest instrument of power,” signalling continued leverage over global energy supply routes.
Ghalibaf added that negotiations on a final agreement would not begin until the provisions of the existing memorandum of understanding had been fully implemented.
Bank of England Governor Andrew Bailey told CNBC that inflation would likely have returned to the central bank’s 2% target around April or May had it not been for the recent conflict.
“It’s going to take longer,” Bailey said, pointing to a weakening economy and a softer labour market as factors allowing policymakers to remain patient despite some Monetary Policy Committee members favouring tighter policy.
UK inflation currently stands at 2.8% and is expected to climb towards 3.2% later in the year as higher energy prices continue feeding through into the broader economy.
Nationwide data showed annual UK house price growth accelerated to 2.2% in June from 1.7% in May, though prices were unchanged on a seasonally adjusted monthly basis, with the average home valued at £277,484.
Chief Economist Robert Gardner said the housing market had “softened a little in recent months” due to uncertainty surrounding the Middle East, higher energy prices, and elevated mortgage rates.
Northern Ireland remained the UK’s strongest-performing region with annual price growth of 8.6% in the second quarter, while the Outer South East recorded the weakest growth at just 0.1%.
In commodity markets, Brent crude rose 0.25% to $73.13 a barrel and US West Texas Intermediate gained 0.14% to $69.60, reflecting cautious optimism around the Doha talks.
Gold continued its retreat, with gold futures falling 1.43% to $3,981.05 an ounce and spot gold declining 0.97% to $3,969.62 during the session.
CMC Markets (LSE: CMCX) provided a standout corporate update, upgrading its FY2027 net operating income guidance following continued strong expansion in its B2B trading platform business.
Topps Tiles (LSE: TPT) issued a profit warning, saying full-year profit is expected to come in only slightly above £6.5 million as softer consumer demand and recent heatwaves weighed on trading conditions.
Greggs (LSE: GRG) confirmed that long-serving Chief Financial Officer Richard Hutton will retire at the end of 2026, with Ben Waldron appointed as his successor to lead the bakery chain’s finances.
Associated British Foods (LSE: ABF) maintained its full-year guidance outside its Sugar division after Primark delivered 3% sales growth during the third quarter, offering some reassurance to investors watching the retail unit closely.