The FTSE 100 edged higher on Tuesday, supported by gains in energy stocks and heavyweight financials, even as conflict in the Middle East continued to weigh on sentiment. Investors remained cautious ahead of this week’s interest rate decision by the Bank of England.
The blue-chip index rose 0.6% by 10:42 GMT, while the mid-cap FTSE 250 added 0.1%.
Geopolitical tensions intensified as Iran expanded strikes on the UAE, disrupting oil flows through the Strait of Hormuz during the third week of the U.S.-Israel conflict with Tehran. The disruption pushed oil prices up by around 4%, boosting energy shares.
The energy sector climbed 1.1% to a record high, with major oil companies BP and Shell each gaining more than 1%, recovering some of the losses seen earlier in the week.
Banking stocks also advanced, with the sector up 0.6%, while utilities rose 1.4%.
UK government borrowing costs fell for a second consecutive day but remained elevated compared to pre-conflict levels. Markets are now pricing in roughly a 50% chance of a Bank of England rate hike in November.
Attention this week is focused on central bank decisions across the UK, the U.S. and Europe, with investors closely watching policymakers’ guidance on handling inflation pressures driven by higher energy prices.
Most economists surveyed by Reuters have now dropped expectations of a March rate cut, instead forecasting a 25-basis-point reduction in April or June. However, JPMorgan expects the Bank of England to hold rates steady through 2026, with the next cut not arriving until early 2027.
Among individual stocks, Close Brothers fell 10.4% to the bottom of the FTSE 250 after announcing plans to cut 600 jobs by fiscal 2027.
