FTSE 100 and European Stocks Fall as Middle East Conflict Weighs on Markets
British stocks and other European markets moved lower on Thursday, reversing gains from the previous session as investors remained focused on the ongoing conflict in the Middle East. Market participants increasingly expect the war to continue for several weeks, adding pressure to equities while investors also assessed a wave of corporate earnings reports.
The FTSE 100 index dropped 1.5%, while the British pound weakened 0.4% against the U.S. dollar, with GBP/USD falling to 1.3320. Other major European benchmarks also declined, with Germany’s DAX falling 1.6% and France’s CAC 40 dropping 1.5%.
Market Outlook Influenced by Middle East Conflict
Investment bank Jefferies believes the conflict could last two to three weeks, based on missile capabilities and the likely objectives of the United States and Israel.
According to the firm, the short-term military goals include:
- Disabling Iran’s missile-launching capacity to protect U.S. bases and regional allies.
- Neutralizing Iran’s naval forces to secure shipping routes through the Strait of Hormuz, a key global energy corridor.
Despite the volatility, Jefferies expects some recent market moves to reverse. In the bond market, the firm believes the recent repricing of short-term interest rates in both Europe and the United Kingdom is excessive and sees opportunities in buying short-dated bonds.
Jefferies also maintains that the European Central Bank (ECB) is still more likely to cut interest rates than raise them this year, although keeping rates unchanged remains the base-case scenario. Markets are currently pricing in a potential rate hike by early 2027, which the firm considers unlikely.
For the Bank of England, Jefferies disagrees with the recent sell-off in short-term bonds and continues to project a terminal interest rate of around 3%.
Key Corporate Movers in the UK Market
Several FTSE-listed companies reported earnings updates that drove significant stock movements during Thursday’s session.
Wizz Air Issues Profit Warning
Shares in Wizz Air Holdings fell after the airline released an unexpected profit warning. The company said the Middle East conflict could reduce its 2026 fiscal year net profit by about €50 million, pushing results below its previously expected range of €25 million to -€25 million.
The estimate assumes that jet fuel prices and exchange rates remain at current levels throughout the fiscal year.
Entain Shares Rise After Strong Earnings
Entain, the sports betting group, saw its shares rise more than 5% after reporting better-than-expected full-year results.
The company posted EBITDA of £1.16 billion for 2025, representing an 8% increase on a constant currency basis and exceeding its guidance range of £1.10 billion to £1.15 billion.
Entain also doubled its target for offsetting the impact of the planned UK online gambling tax increase.
Rentokil Reports Strong North America Growth
Rentokil Initial shares moved higher after the pest control group reported an acceleration in North American organic growth.
The company posted 2.6% organic growth in North America during the fourth quarter, compared with negative growth of -0.2% in the first quarter. For the full year, 2025 revenue reached $6.91 billion, with overall organic growth of 2.6%, slightly above analyst expectations.
Coats Group Raises Profitability Targets
Coats Group shares jumped more than 8% after the company increased its medium-term operating margin target to 21%–23%, up from the previous range of 19%–21%.
The company also raised its five-year free cash flow target to around $1 billion. For 2025, Coats reported adjusted operating profit of $290 million on revenue of $1.465 billion, with operating margins improving to 19.8%.
Other UK Corporate Updates
- Ibstock reported 2025 results broadly in line with expectations, though its shares slipped slightly. The building materials company posted £372 million in revenue and £71 million in adjusted EBITDA.
- Reckitt Benckiser delivered strong fourth-quarter sales growth of 5.4%, driven largely by emerging markets, where annual revenue increased 14.6%.
- WH Smith reported 5% revenue growth in the first half, though its shares declined after like-for-like sales rose only 2%, slightly below earlier performance levels.
- PageGroup posted gross profit of £769.5 million for 2025, down 7.6% year-on-year, reflecting weaker hiring activity in global recruitment markets.
- Elementis exceeded analyst expectations with adjusted earnings per share of 13.7 cents, supported by strong margin expansion.
- Aviva reported operating profit of £2.2 billion for 2025, up 25% year-on-year, reaching its £2 billion target one year ahead of schedule.
- Taylor Wimpey posted adjusted operating profit of £420.6 million, meeting guidance as revenue increased 13% to £3.84 billion, supported by higher home sales and rising average selling prices.
Overall, European stock markets remain under pressure, as investors balance geopolitical risks, central bank policy expectations, and corporate earnings developments.
