The primary UK stock indexes experienced a decline on Thursday, following their most robust performance in several months the previous day, as oil prices surged amid increasing skepticism regarding the sustainability of a tenuous ceasefire in the Middle East conflict. The blue-chip FTSE 100 dipped 0.3% by 0927, while the midcap FTSE 250 slipped 1.1%. The FTSE 350 energy index climbed 1% as oil prices jumped almost 3% on concerns that energy flows through the crucial Strait of Hormuz will remain restricted.

The sustainability of the ceasefire is under scrutiny as Israeli strikes on Lebanon persist, prompting Iran to characterize it as “unreasonable” to advance discussions aimed at establishing a lasting peace agreement. The FTSE 100 recorded its biggest percentage gain in a year on Wednesday following the two-week ceasefire deal between the U.S. and Iran. Rate-sensitive homebuilders came under pressure as bond yields edged higher. The two-year gilt yield, indicative of short-term rate expectations, increased to 4.25% following its most significant one-day decline since March 2023.

Market participants were anticipating an increase of 40 basis points in interest rates from the Bank of England by the conclusion of this year, a rise from the 32 basis points projected on Wednesday. Britain’s housing market exhibited a marked cooling last month, as economic uncertainty arising from the Iran war unsettled buyers contending with increasing mortgage rates, according to a survey.

Ceres Power Holdings opened a new tab and fell 7.7% after brokerage Peel Hunt downgraded the clean energy technology developer’s stock to “sell” from “hold.” ME Group International opens new tab climbed ​3.7% after the vending machine operator secured a partnership with retailer ASDA to install ​Wash.ME laundry machines.