UK and European equities lost momentum as hopes of a near-term easing in the Middle East were reversed by a more hawkish US tone on Iran. The move back into risk aversion left broad regional indices weaker, while energy names offered relative support as higher crude prices improved the sector’s earnings backdrop. The broader tone was more cautious, with investors again focused on the inflationary implications of a sustained energy shock and the knock-on effect for growth, rates and household demand.

US markets turned lower as investors responded negatively to the latest White House messaging on Iran, which appeared to reduce confidence in a swift de-escalation. The renewed rise in oil fed concerns around inflation and policy, while the equity sell-off was led by cyclical and growth areas that had benefited from the prior relief rally. The overall mood was defensive, with geopolitical uncertainty again dominating sentiment into the close.

Asia-Pacific markets were also weaker, with the region pressured by the same combination of geopolitical uncertainty and higher energy costs. Import-dependent markets were especially sensitive to the move in crude, and the tone across the session suggested investors were reassessing the earlier optimism that the conflict might soon cool. The regional picture was therefore one of renewed caution rather than broad-based liquidation, but risk appetite clearly softened.

Oil was the clearest expression of the day’s risk repricing, surging on fears that the conflict could remain disruptive for longer and continue to threaten flows through key shipping routes. The market’s reaction suggests that investors are now attaching greater weight to supply-risk scenarios than they were earlier in the week, and that has quickly fed through into inflation expectations across developed markets. For European and UK assets in particular, firmer energy prices remain the central macro headwind.

Gold fell sharply, an unusual but telling response that reflected the stronger dollar, firmer yields and a broader repositioning rather than a classic flight to safety move. In other words, the metal did not benefit from geopolitical stress in the usual way, as investors instead focused on tighter financial conditions and reduced expectations for easier monetary policy. The move leaves gold trading more like a rates-sensitive asset than a straightforward haven in the current environment.

On the company side, Lloyds drew attention after indicating that it would keep its existing motor finance provision unchanged following the latest regulatory update, signalling that legal and operational uncertainty still hangs over the issue even as the framework becomes clearer. Elsewhere, Unilever remained in focus after criticism over the structure of its food-business transaction, with the debate centring less on strategy itself than on governance, execution and the degree of shareholder influence under the current listing regime.