London stocks fall as Mideast tensions weigh; Burnham becomes new British premier

By Shashwat Chauhan and Tharuniyaa Lakshmi

July 20 (Reuters) - The main UK stock indexes closed lower on Monday as continued U.S.-Iran tensions sapped risk sentiment globally, offering a muted reaction to Andy Burnham becoming Britain's seventh prime minister in a decade.

The internationally focused FTSE 100 lost 0.7% to mark its biggest one-day fall in about two-weeks. The mid-cap FTSE 250 fell 0.3% and the small-cap index eased 0.2%.

Burnham pledged to re-shape Britain's politics to deliver a new economic model and revive a nation "fed up" with a revolving door of leaders. He said he would set out immediate measures on Tuesday to ease everyday pressures on Britons.

A key first decision will be his choice of finance minister. Friction in this axis of government has brought down previous administrations.

"His Chancellor will have to assess a tighter fiscal backdrop. Headroom appears limited, with earlier buffers partly eroded by higher rates, a softer macro-outlook and renewed geopolitical risks," said Sanjay Raja, Deutsche Bank's chief UK economist.

An early frontrunner for the position, energy security and net zero minister Ed Miliband, has been the object of hostile briefing, and interior minister Shabana Mahmood now appears favourite for the job.

Interest-rate sensitive homebuilders led losses among the major FTSE 350 sectors, down 3.5%. Long-dated British government bond yields edged up, with the on the 30-year note hitting a two-month high.

Utilities, often traded as bond proxies due to their steady stream of dividends, dipped 1.4%

Heavyweight Pharma and Biotech stocks lost 1.6%, with AstraZeneca — the second most valuable company in the UK in terms of market capitalization — down 1.7%.

Risk-sentiment remained shaky globally as U.S. strikes on Iran entered a ninth straight day. Yemen's Iran-aligned Houthis also stated they were imposing a naval blockade on Saudi Arabia.

In broad-based signs of weakness, banks lost 0.7% and industrial metal miners shed 1.1%.

UK-listed shares of airlines came under pressure after Europe's largest airline by passenger numbers Ryanair's profit slumped by a third in its most recent quarter on higher fuel costs and lower fares.

Wizz Air fell 2.9%, British Airways' owner IAG dipped and easyJet eased 1.4% each.

Among others, Computacenter jumped 5.6% after brokerage Berenberg upgrades its rating on the technology services provider to "buy" from "hold".

(Reporting by Tharuniyaa Lakshmi and Shashwat Chauhan in Bengaluru; Editing by Maju Samuel)