London stocks drop as Middle East tensions drive oil prices higher

London’s markets closed lower on Friday amid heightened tensions in the Middle East, surging oil prices and worries over potential deflation in China.

BP and Shell helped provide some positive thrust on the FTSE 100 as they benefited from the spike in energy prices, while improved gold prices also pushed Endeavour and Fresnillo up.

However, the sentiment was still broadly negative, with retail and housing firms lower in the face of broad concerns over the economic outlook.

The FTSE 100 moved 0.59%, or 45.18 points, lower to finish at 7,599.6.

Across Europe, trading started on the back foot after Chinese consumer prices were flat for September, below a predicted increase, as its producer price index also showed a 2.5% decline.

Germany’s Dax index was 1.55% lower for the day and the Cac 40 closed down 1.44%.

Stateside, traders were in somewhat better spirits, with confirmation of Microsoft’s huge acquisition of computer games firm Activision helping support sentiment.

Axel Rudolph, senior market analyst at IG, said: “Following China deflation worries, after inflation data missed expectations of a rise, and heightened tensions in the Middle East, European stock indices ended the week on a negative note.

“Their US counterparts fared better though as major US banks reported rising profits from higher interest rates on loans.”

Meanwhile, sterling was weaker against the dollar as defensive investors supported the US greenback.

The pound was down O.35% at 1.213 US dollars and was 0.06% lower at 1.155 euros at market close in London.

In company news, St James Place was the FTSE 100’s heaviest faller after it tumbled amid concerns over pressure from regulators.

The Financial Times reported the wealth manager has seen growing worries among investors that the Financial Conduct Authority is pressuring it to overhaul its fee structure to ensure it complies with the UK’s new consumer duty rules.

Shares in the firm were 178.4p lower at 640.2p at the close as a result.

Elsewhere, shares in Halfords dropped back after it had seen shares spike on Thursday due to speculation it could be the target of a takeover approach.

Markets blog Betaville had reported the motoring and cycling retailer had received a mystery approach, driving its value higher, but the lack of any confirmation from Halfords itself caused shares to recoil. It closed down 26.2p at 190.2p.

Fashion firm Next was lower despite agreeing a deal to buy UK high street rival Fat Face.

It told shareholders during the afternoon it would buy Fat face from a consortium of lenders for £115.2 million in its latest in raft of takeovers. Next shares dipped by 74p to 6,854p.

The price of oil moved to a one-week high over concerns that events in the Middle East could intensify further after Iran warned Israel against ground attacks on Gaza.

A barrel of Brent crude rose by 4.22% to 89.63 US dollars (£73.86) as markets were closing in London.

The biggest risers on the FTSE 100 were Fresnillo, up 26p to 554.8p, Endeavour Mining, up 72p to 1,659p, BP, up 11.3p to 547.4p, United Utilities, up 17.4p to 998p, and National Grid, up 14.8p to 979.4p.

The biggest fallers on the FTSE 100 were St James’s Place, down 172.6p to 646p, Ocado, down 42.8p to 529.4p, JD Sports, down 6.6p to 130.85p, Spirax-Sarco, down 422p to 8,472p, and Hargreaves Lansdown, down 29.6p to 739.8p.