UPDATE 2-FTSE steadies as U.S.-Iran fears ease; Brexit doubts hit midcaps

* FTSE 100 flat, FTSE 250 down 0.8%

* Markets stabilise after Iran missile attack

* NMC, Finablr tumble after shareholders sell stake

* Wood Group down as CMA to probe nuclear unit sale
(Writes through)

By Shashwat Awasthi

Jan 8 (Reuters) - London's main index recouped almost all
its earlier losses on Wednesday as markets hoped flaring
tensions between the United States and Iran would not escalate
further, while midcaps slipped as worries of a hard Brexit
resurfaced.

The FTSE 100 ended roughly flat. The FTSE 250
tumbled 0.8% as a steep fall in payment processing firm
Finablr also weighed.

Both benchmark indexes were initially jolted after Iran
retaliated for the killing of one of its top commanders last
week by launching missile strikes at U.S. forces in Iraq.

OANDA analyst Craig Erlam suggested markets may be viewing
Iran's move as a "more symbolic retaliation rather than one
intended to harm, which reduces the case for the U.S. to respond
with force."

Tensions had threatened to boil over during the night but
dealers turned sanguine as the day progressed. In the final few
minutes of trading, U.S. President Donald Trump also signalled a
desire to de-escalate the crisis with Iran.

"For the near term, markets are likely to stage a second
attempt at a gradual return to calm - albeit uneasy," Cityindex
analyst Ken Odeluga said. He added that the risk of escalation
would continue to lurk in the background.

Receding worries over the situation in the Middle East and a
build in U.S. crude stockpiles led oil prices to session lows.
Shell and BP were the biggest drags on the
blue-chip index.

The midcaps' underperformance was down to comments from a
European Central Bank policymaker that Britain could crash out
of the European Union without a deal by the end of 2020.

While Prime Minister Boris Johnson's victory in the Dec. 12
election had spurred hopes of a smooth Brexit process, his hard
line on inking a free trade deal with the EU by December has
investors concerned.

Blue-chip NMC Health slumped 16% and Finablr slid
18% to a fresh low after a discounted share sale by major
shareholders. Finablr's unit Travelex separately confirmed it
was hit by a software virus attack.

Wood Group skidded 7.6% after UK's competition
watchdog said it would probe the proposed sale of the company's
nuclear unit to Jacobs Engineering.

Sirius Minerals soared 35% to a near four-month high
after Anglo American said it was in advanced talks to
buy the fertiliser maker. Anglo shares ended flat.
(Reporting by Shashwat Awasthi in Bengaluru; Editing by Arun
Koyyur, William Maclean)