Starmer's Resignation Fizzles on the Stock Markets – Iran Negotiations Drive the Action

Burnham the Favorite at the Top

Starmers's internal party rival Andy Burnham is considered a likely successor. He has not yet detailed his plans for foreign, economic, and defense policy. At least there are reports that Burnham is working with respected economists, said MUFG analyst Hardman. That could limit the downside risks for the pound and government bonds in the short term. Former Health Secretary Wes Streeting joined the Burnham camp in a statement posted on X and called Starmer's decision "richtig"; at the same time, he is seen as a possible next Chancellor of the Exchequer.

FTSE Reacts Restrained

The blue-chip FTSE index initially remained almost unchanged and then edged slightly higher. The FTSE 100 rose 0.4 percent to 10,404.72 points. The British pound, which showed little change on Monday, had already lost around three percent against the dollar since the leadership dispute in the Labour Party intensified in February. Yields on ten-year British government bonds (gilts) fell by three basis points to 4.811 percent, after hovering near their 2008 highs at 4.84 percent the day before. The United Kingdom has thus had the highest borrowing costs of all G7 industrialized nations for quite some time.

The backdrop to this political earthquake is ongoing economic stagnation. In its almost two years in power, the Labour government has so far failed to overcome the economic stagnation, despite campaigning on annual growth of 2.5 percent. After growth of a still respectable 1.3 percent in 2025, economic institutes are forecasting a maximum increase of 1.1 percent for this year. Almost exactly ten years after the British Brexit vote, it is clear that leaving the EU has not advanced the United Kingdom's economy.

Shadow of Brexit and Economic Crisis

In nationwide polls, however, the Brexit backer Nigel Farage's Reform UK party has led since February 2025. In light of the ongoing economic crisis, a return to the EU had also been discussed within the Labour Party of late. For example, German exports to the United Kingdom fell by around seven percent between 2016 and 2025. That is also because British companies, much like their German counterparts, generate the bulk of their revenues outside the domestic market. The new prime minister will be the seventh since the Brexit referendum ten years ago; the next general election is due by 2029 at the latest.

On the German stock market, negotiations to end the Iran war remain the dominant driver of prices. Following the start of talks between the United States and Iran in Switzerland at the level of lead negotiators, further consultations at working level are to take place immediately afterwards. The situation in Lebanon remains a burden, although the latest news points to a rapprochement between the United States and Iran. Hopes of a way out of the Middle East war weighed on defense stocks: Rheinmetall shares lost 1.1 percent, and in the MDAX, Hensoldt shares shed a sharp 4.6 percent.

Iran Negotiations as the Price Driver

The DAX was trading at midday at 24,945.75 points, down 0.2 percent, and thus only just below the 25,000 mark. In the early afternoon, the German blue-chip index was little changed at 24,992 points. Selling set in when the DAX attempted a push above the 25,000-point mark. Heavyweights such as SAP and Rheinmetall each lost around two percent. SAP shares fell 2.2 percent, Capgemini lost 1.5 percent, and Scout24 also dropped 1.5 percent – concerns about possible negative effects of AI applications on the software business weighed on the sector. At the very top of the sell lists, by contrast, were shares of consumer goods manufacturers, media companies, and construction and building materials firms.

Market analyst Maximilian Wienke of the broker eToro therefore sees a critical transition phase in which the greatest danger stems not from the economy but from a possible collapse of the negotiations. "Die Börsen feierten bisher keinen Friedensvertrag, sondern honorierten lediglich Fortschritte auf dem Weg dorthin", said Wienke. The Euro Stoxx 50 rose 0.1 percent to 6,296.87 points, and over the course of the trading day the index gained as much as 0.29 percent. Across Europe, the leading bourses closed in positive territory, with the euro trending slightly weaker at 1.1452 dollars.

In the European sector overview, technology stocks were once again the most sought after. Infineon shares climbed 5.3 percent to 86.28 euros, leading the semiconductor stocks. BE Semiconductor, STMicro, and ASML rose by up to 3.7 percent, and in the Euro Stoxx and the French CAC 40, Infineon and STMicroelectronics were among the bigger gainers. Bernstein analysts raised their price target for Infineon to 102 euros from 74 euros, pointing to the company as one of the key beneficiaries of power semiconductors. Shares of chipmakers SK Hynix and TSMC also posted clear gains in Asia. In Paris, Danone shares rose 0.6 percent after the group announced the acquisition of Australian manufacturer Made Group.

Semiconductors Top the Gainers List

Among second-line stocks, index changes generated movement: Hochtief was admitted to the DAX for the first time, replacing Porsche Automobil Holding, which moved to the MDAX; at the same time, there were further adjustments in the MDAX and SDAX. Hochtief shares gained 1.0 percent, while Porsche Automobil Holding shed 3.3 percent. Nordex shares rose 2.5 percent after the company said it had received a first tranche of larger US orders from three unnamed customers; Jefferies analysts saw this as a positive signal for market entry in the United States.

By contrast, OHB shares lost 4.4 percent to 387.50 euros after the company announced plans to issue new shares at 300 euros each as part of a planned capital increase, aiming for gross proceeds of up to 510.7 million euros. OHB had presented plans around a week earlier to raise roughly 500 million euros through a capital increase to expand production capacity. Investor KKR is offering up to around 1.23 million existing OHB shares as part of the transaction.

The index of oil and gas companies extended its stabilization following the preceding losses, although oil prices continued to decline. The price of a barrel of Brent crude fell 1.8 percent to 79.10 dollars, slipping below the 80-dollar mark. According to the article, Saxo Bank said progress in the US-Iran negotiations and efforts to secure passage through the Strait of Hormuz had eased concerns about energy supply bottlenecks and a broader inflation shock.

Away from the political stage, Easyjet made headlines: the British low-cost airline also rejected a third non-binding takeover offer from US investor Castlelake, according to the suitor. Castlelake offered Easyjet on 20 June to acquire all shares for 625 pence per share in cash. The Easyjet board had previously rejected offers of 560 and 600 pence. The Americans now have until 26 June to submit a binding takeover bid or withdraw their offer. Easyjet shares nevertheless rose 2.8 percent to 518 pence.

Easyjet Rejects Castlelake Once Again

Over the past six months, the so-called "Footsie" had performed barely worse than, for example, the US S&P 500. The British blue-chip index thus proved surprisingly robust by international comparison, even as the political leadership crisis at home continued. Investors are now looking ahead to the coming weeks with interest: should Burnham indeed win the race, the economic policy reorientation could durably change sentiment in the markets.