Oil prices pushed higher on Friday while global markets edged lower, as an attack on two oil tankers prompted fears over supply.
The incident, which took place near the crucial Strait of Hormuz on Thursday, has been blamed on Iran by the United States.
A barrel of Brent crude oil was trading at 62.09 US dollars, 1.24% higher.
Helal Miah, investment research analyst at The Share Centre, said: “We go into the weekend with heightened tension between Iran and its Middle Eastern neighbours and their US allies, oil prices will be very volatile and react after the weekend should accusations between the parties risk possible flare-ups.”
The tense political climate had a negative effect on global stocks, while the ongoing trade spat between the US and China did nothing to help matters.
The FTSE 100 dropped 22.79 points, or 0.31%, to close at 7,345.78.
Meanwhile, the German Dax fell 0.6% and the French Cac was 0.15% lower.
The pound tumbled 0.61% against the US dollar to 1.260, but was flat on the euro at 1.124.
Fiona Cincotta, senior market analyst at City Index, said the emergence of Boris Johnson as the frontrunner in the Conservative leadership race could still have a significant impact on sterling.
“For the pound, one of the key aspects of Johnson’s stance is his view of a no-deal Brexit and sterling’s inactivity this morning reflects his recent more conciliatory view saying that he was not aiming for a no-deal outcome,” she said.
“For the moment the fabled volatility in the currency market has not materialised, but there is time yet for the temperature to start rising.”
In company news, new releases of annual reports showed that bosses at more than one big company will miss out on bonuses this year.
The entire board of SSE got no annual bonus this year after the collapse of its merger with npower in 2018.
Shares dipped 4p to 1,122p.
Royal Mail directors were also denied a bonus, after a disastrous period for the postal service.
Chief executive Rico Back, who faced heavy criticism over a £5.8 million golden hello when he joined last June, missed out while former boss Moya Greene also failed to secure a payout following poor results.
Shares in the group were up 4.4p to 199.95p.
Elsewhere, the boss of guarantor lending firm Amigo stepped down due to ill-health.
Glen Crawford resigned as chief executive officer and executive director of the firm to undergo medical treatment for a degenerating spinal condition.
The firm’s shares dropped 2p to 276p.
The London market is set to welcome a new entrant as global insurance giant Swiss Re confirmed plans to float its UK life insurance arm ReAssure next month.
The biggest risers on the FTSE 100 were Fresnillo up 27.4p to 839.8p, National Grid up 14.9p to 833.4p, Compass Group up 28.5p to 1,911.5p and Relx up 28p to 1,908.5p.
The biggest fallers on the FTSE 100 were ITV down 4.75p to 105.25p, Auto Trader down 18.8p to 561.4p, DS Smith down 10.7p to 350.1p, and Melrose Industries down 4.85p to 169.55p.