UK stocks fall as lack of progress in US-Iran talks lifts oil prices

London shares fell on Thursday as continued fighting in the Middle East pushed oil prices to one-week highs, stoking inflation concerns worldwide and lifting government bond yields.

The blue-chip FTSE 100 index dipped 0.24% to 10,679.99 points, while the midcap FTSE 250 slipped 0.85%.

Oil prices rose more than 4% after Yemen's Iran-backed Houthis fired missiles at Saudi Arabia and diplomatic talks between the US and Iran showed little sign of progress. Oil majors BP gained 2.6% and Shell rose 1.7%. O/R

Meanwhile, industrial stocks were the biggest drags, with Rolls-Royce and BAE Systems down 1.3% and 1.5% respectively.

Homebuilder Vistry slipped 3.1% after it lowered its annual profit expectations and said it would take a £470 million ($622.51 million) hit from its strategic overhaul.

Raspberry Pi jumped 19.6% after the single-board computing company reported higher first-half revenue and pretax profit.

Bond markets were in focus again as UK gilt yields rose in line with global bond yields, with the benchmark 10-year gilt GB10YT=RR yield hitting a more than one-week high at 5.38%.

British finance minister John Healey may accept a smaller fiscal buffer to reduce tax rises in next month's budget as investors signaled the gilt market would not be spooked by a more modest headroom target, the Financial Times reported.

Bank of England Deputy Governors Clare Lombardelli and Sarah Breeden hinted at the possibility of future interest rate hikes, while BoE Monetary Policy Committee member Swati Dhingra said winter will be key for judging UK inflation risks

Traders are fully pricing in at least one 25-basis-point hike by the BoE this year, according to data compiled by LSEG.

Trump-Xi summit, seen as symbolic, becomes focus of investors

Investors are also focused on the Trump-Xi summit, seen as largely symbolic despite efforts to project stability between both sides amid deep rivalry.

Insurer Standard Life and technology services provider Computacenter shed 4.2% and 4.4% respectively, as their shares traded ex-dividend.