The FTSE 100 is expected to open Tuesday's trading session lower at 10,327 points.
The initial domestic political shock has largely been absorbed by the market, and investors are looking more constructively towards the months ahead following Prime Minister Keir Starmer's announced resignation. Many market participants believe that the political outlook is now more likely to improve than deteriorate, helping to stabilise overall sentiment.
Nevertheless, signs of the traditional summer slowdown are becoming increasingly evident in UK equities. The FTSE 100 has held up relatively well despite the uncertainties surrounding the conflict with Iran, benefiting in particular from the earlier surge in energy prices, which provided strong support for heavyweight constituents BP and Shell.
As geopolitical tensions begin to ease, however, energy markets are giving back some of their risk premium, while concerns over slowing economic growth are gradually moving back into focus. Against this backdrop, many investors are choosing to lock in profits and move to the sidelines rather than increase risk exposure.
The risk of a more pronounced market correction during the typically quieter summer months remains elevated, particularly as the deadline attached to the diplomatic ultimatum for Iran approaches. With fewer market-moving events on the calendar, geopolitical developments could once again become the dominant driver of investor sentiment and market volatility.
