* Labour Party suffers heavy local election losses,

Reform UK gains ground

* British Airways owner says fuel costs will be 2 billion

euros higher in 2026

* Intertek ( IKTSF ) rejects third sweetened takeover bid from EQT

* UK house prices decline for second month as Iran

conflict dampens demand

* FTSE 100 down 0.4%, FTSE 250 falls 0.2%

(Updates after markets close)

May 8 (Reuters) - UK's FTSE 100 slipped on Friday as

fresh clashes in the Gulf raised fears over a fragile month-long

U.S.-Iran ceasefire, while investors digested early local

election results showing heavy losses for Prime Minister Keir

Starmer's Labour Party.

The blue-chip FTSE 100 index closed 0.4% lower at

10,233.07 points, marking a third straight weekly fall. The

midcap FTSE 250 inched 0.2% lower.

* British Prime Minister Keir Starmer vowed to stay in

office to "deliver change" after his Labour Party suffered heavy

losses in local elections that deepened doubts over his ability

to govern.

* The results highlighted the splintering of Britain's

two-party system into a multi-party democracy, a historic

political shift, analysts said.

* "Risks of a leadership challenge can rise post the May

local elections, though it is not a given," strategists at Bank

of America said in a note, adding: "if a leadership challenge

were to ensue, and a left-leaning Labour leader were to emerge,

risks of higher borrowing would increase."

* The British pound firmed, weighing on shares of UK

multinationals that earn a large share of revenue abroad.

* British Airways owner IAG fell 2.8% after warning

its annual profit would be lower than forecast and flagged that

jet fuel costs would be about 2 billion euros higher in 2026

than in 2025 due to the conflict.

* Intertek ( IKTSF ) shed 2.7% after rejecting a third

sweetened 8.93 billion pound ($12.12 billion) takeover proposal

from Swedish private equity firm EQT AB.

* Global risk sentiment was fragile after the U.S. and Iran

exchanged fire in the Middle East, even as U.S. President Donald

Trump played down the hostilities. Oil prices rose back above

$100 a barrel.

* Domestic data showed British house prices fell in April

for the second straight month as concerns about the impact of

the war in Iran hurt buyer demand.

* In the U.S., data showed employment increased more than

expected in April, pointing to continued labour market stability

and reinforcing expectations that the Federal Reserve would

leave interest rates unchanged for some time.

($1 = 0.7368 pounds)