May 18 (Reuters) - UK's blue-chip FTSE 100 gained on Monday, lifted by energy stocks tracking higher crude oil prices, while the more domestically focused midcap index was subdued amid concerns about inflation and Prime Minister Keir Starmer's future.
The FTSE 100 ended 1.3% higher at 10,323.8 points, while the FTSE 250 ended 0.07% lower after falling as much 0.7% earlier in the day.
o Earlier in the day, Starmer's deputy said he would not set out a timetable for his departure, defying calls to quit from his party's lawmakers. Starmer said he remained focused on doing his job.
o The prime minister has dug his heels in despite intense pressure following a set of poor local election results earlier this month.
o Last week, Greater Manchester Mayor Andy Burnham said he would seek to contest a parliamentary seat becoming vacant after a colleague decided to stand down, paving the way for him to challenge Starmer for the Labour leadership.
o Investors are concerned that Burnham could usher in a period of more government spending and borrowing, straining Britain's already stretched public finances.
o "The political centre of gravity is likely to shift left. And yes, there is pressure to adapt the fiscal rules. But politicians across the spectrum are presumably acutely aware there are limits," said James Smith, developed markets economist, UK, at ING.
o With shipping through the Strait of Hormuz still disrupted, inflation worries have gripped markets, particularly as oil prices stay elevated.
o Brent crude futures rose 1.6% as worries over supply disruption from the Iran war offset a report the U.S. had accepted temporarily waiving sanctions on Iranian crude. Energy stocks rose 2.9%.
o Homebuilder stocks dropped 0.5%. Asking prices for British homes in May rose by more than usual for the time of year, property website Rightmove said.
o Bank stocks climbed 1% as the finance ministry laid out planned changes ?to ring-fencing rules, which it said would create a "more agile and proportionate regime".
(Reporting by Niket Nishant and Shashwat Chauhan in Bengaluru; Editing by Nivedita Bhattacharjee and Shilpi Majumdar)
