* FTSE 100 up 0.2%, FTSE 250 down 0.5%
* U.S. kills Iranian major general, Iraqi militia commander
* Investors pile into oil
* Tobacco cos up on U.S. regulator action
* Gambling cos fall among midcaps (Writes through)
By Shashwat Awasthi
Jan 3 (Reuters) - London’s main stock index overturned earlier loses to end higher on Friday as a U.S. air strike in Iraq stoked fears of a disruption in crude supply, supporting shares of oil heavyweights, and as tobacco stocks firmed.
The FTSE 100 had been pressured for most of the session as rising geopolitical tensions after the air strike, that killed top Iranian and Iraqi commanders, drove investors away from risky assets and towards safe havens such as gold.
But Shell and BP jumped more than 2% each and the oil sector almost single-handedly helped the blue-chip bourse record a 0.2% gain and outperform the European benchmark .
BAT and Imperial Brands added 2.5% each to lend further support after the U.S. health regulator exempted menthol and tobacco from a list of e-cigarette flavours that it has banned under new guidelines.
The more domestically focused FTSE 250 shed 0.5%, however, as weak UK construction data and the broader risk-off sentiment weighed.
“Chances that a further escalation of tensions (by Tehran) with Washington can be avoided appear to be low,” Cityindex analyst Ken Odeluga said. “Risk assets therefore look unlikely to reclaim their solid advance out of the gates in 2020 anytime soon.”
Prospects of higher fuel costs dragged shares of airline companies lower. easyJet and British Airways owner IAG gave up 1.7% and 3.4%, respectively.
Gambling stocks were knocked after a report here that firms could be banned from running "VIP schemes" that reward gamblers who regularly lose large sums with free bets and offer cashback on losing wagers.
William Hill, Playtech and GVC fell between 0.7% and 4.7%.
Payment solutions firm Finablr slipped 4% after its unit, Travelex, said on Thursday it had taken all its systems offline after being hit by a software virus.
Galliford soared almost 78% on its best day ever, reflecting an adjustment to the share price following the completion of the demerger and sale of its housebuilding business to Bovis Homes.
Both UK benchmark indexes ended the holiday-shortened week modestly lower.
Profit-taking before the turn of the decade had eaten into the indexes’ gains earlier this week and Odeluga warned Friday’s events in the Middle East could cause sentiment to remain subdued.
“Worries that forecasts of moderate stock market progress may be in jeopardy won’t be easy to allay,” he said. (Reporting by Shashwat Awasthi in Bengaluru; Editing by Arun Koyyur and Nick Macfie)