FTSE 100 down 219 points to 10,085

Brent crude oil soars as Iran and Israel attack energy facilities

UK unemployment rate stable at 5.2% last month, wage growth slowed

Bank of England decision at midday

The Bank of England has held interest rates at 3.75%, with the monetary policy committee voting unanimously to sit tight as the Middle East conflict drives energy prices sharply higher and clouds the inflation outlook.

The Bank warned that CPI inflation – currently 3% – could rise to 3.5% by the third quarter, but said it was equally alert to the risk that higher energy costs would weaken an already fragile economy.

It's coming up to the Bank of England decision, though no changes to interest rates are expected.

"It’s hard not to feel sympathy for the BoE", says market analyst Kathleen Brooks at XTB, ahead of today’s monetary policy committee meeting.

"Less than three weeks ago there was an 80% chance of a rate cut at this meeting, now there is a small chance of a hike. This 180-degree turn in rate cut expectations has nothing to do with the BOE or the UK economy, and everything to do with the Middle East conflict that is causing an historic energy price spike."

A hold on rates is expected, she says, with the BoE likely to "try to buy some time to see how the war plays out in the coming weeks and months".

She says "the risk is that central bankers, typically a conservative bunch, spook markets with bleak outlooks" but thinks that "there is a good chance that the BOE will want to stress the unique position that it finds itself in", with things "very different now compared to 2022" when Russia invaded Ukraine.

"Back then, the UK economy was strong, there was a post-covid boost, unemployment was at historically low levels, wages were rising rapidly and the consumer was happy to spend. The current energy price spike is happening when the UK economy is weak."

If the MPC does suggest that rate hikes could be coming, "this would be a major policy mistake in our view and would likely put the brakes on consumer spending and worsen the UK’s economic outlook", with 1.8 million UK mortgage holders expected to refinance in 2026 so "would be disastrous in an already weak economy".

The market impact could be "nuanced", says Brooks, depending on what the MPC says about the impact from an energy price spike on their inflation and monetary policy forecasts

Wathc the EUR/GBP more than the GBP/USD, she says, with the pound having outperformed the euro for the duration of the Gulf conflict so far.

The ECB is also meeting today, but are seen as biased towards a prolonged pause in rate cuts before this crisis, and less concerned about the growth outlook as the BoE.

 

Looking for positives from war is something that investors and analysts often do.

Jefferies clean tech team reckon the Middle East conflict could prove a catalyst for Europe's energy transition, echoing the push toward renewables that followed Russia's invasion of Ukraine in 2022.

Europe's larger wind and solar base is already "cushioning" the impact of higher gas prices on wholesale electricity costs, which the analysts say is a sign of how much the continent's energy mix has shifted, with renewables rising from around 30% of EU power generation in 2019 to nearly 50% last year.

Analyst Constantin Hesse highlights renewable energy equipment makers and utilities as likely beneficiaries, naming FTSE 100-listed SSE as well as several European names such as Vestas, RWE, Engie and Nordex among preferred stocks.

Spain was cited as a leading example, with gas setting electricity prices in only around 15% of hours so far in 2026, compared with 89% in Italy, thanks to its rapid buildout of solar and wind capacity.

Goldman Sachs warned on Wednesday that the Middle East conflict could knock 0.5 percentage points off UK economic growth this year, push inflation higher, and delay Bank of England interest rate cuts until July at the earliest.

The bank raised its UK inflation forecast for the second half of 2026 by 0.5 percentage points, though it said the Ofgem energy price cap – which limits what suppliers can charge households – should soften the blow.

On interest rates, Goldman said there was a "low hurdle to delay cuts" but a "high bar to hike," given that unemployment is already rising and the starting point for monetary policy is already restrictive.

Some analysis of the falls for NatWest, M&G and Standard Chartered, which are contributing to the Footsie's almost 200-point plunge this morning.

For banks, the sell-off reflects the escalating Middle East conflict raising fears of a wider hit to global economic activity and a resulting deterioration in credit quality, increasing the perceived risk on lenders' loan books.

Asset and wealth managers face a more mechanical problem: falling equity markets directly reduce assets under management, and with them the fee income that drives revenues.

M&G and its peers tend to be sold alongside banks on days when UK indices decline sharply, even though the underlying pressures differ.

Life insurers are less directly exposed to short-term equity swings, but sustained market weakness raises questions about capital buffers and the volume of new business being written, which is enough to push their shares lower on risk-off days.

Brent crude topped $118 a barrel this morning but has seen the peak pared back to $114 now.

President's Trump's efforts to calm energy markets do not seem to be working.

Yesterday, to try and reduce energy freight costs, he temporarily lifted the Jones Act shipping law for 60 days, temporarily allowing foreign-flagged vessels to move fuel, fertiliser and other goods between US ports.

And last night he posted on social media after Israel hit the massive South Pars gas field in Iran.

"The United States knew nothing about this particular attack, and the country of Qatar was in no way, shape, or form, involved with it, nor did it have any idea that it was going to happen," he wrote.

"Unfortunately, Iran did not know this, or any of the pertinent facts pertaining to the South Pars attack, and unjustifiably and unfairly attacked a portion of Qatar’s LNG Gas facility.

"NO MORE ATTACKS WILL BE MADE BY ISRAEL pertaining to this extremely important and valuable South Pars Field unless Iran unwisely decides to attack a very innocent, in this case, Qatar."

He threatened that if Qatar LNG facilities are attacked again, the US "will massively blow up the entirety of the South Pars Gas Field at an amount of strength and power that Iran has never seen or witnessed before. I do not want to authorize this level of violence and destruction because of the long term implications that it will have on the future of Iran".

The FTSE 100 has fallen 177 points to 10,128.62 in just over an hour and a quarter, led by miners, banks, airlines and engineers.

While the London index is down 1.7%, Germany's DAX is down over 2%, while benchmartks in Paris, Milan and Madrid are down 1.5-1.9%.

The Euro Stoxx index is down 1.7%, with losses across various sectors, including property, hotels and miners.

“The oil price remains in the driving seat," says market analyst Richard Hunter at Interactive Investor, adding that it is depressing risk sentiment across equities.

"The main unknown and therefore the largest concern for investors has been the duration of the conflict.

"The longer it progresses, so the chances of higher inflation and crimped economic growth become elevated.

"At the current time, the conflict appears to be escalating rather than abating, with the rhetoric from both sides threatening further military strikes.

"With this backdrop in mind, central banks have had little option but to adopt a wait and see approach. Any inflationary impact from the conflict is not yet feeding through to economic data, and the Bank of Japan and Bank of Canada joined the Federal Reserve in leaving interest rates unchanged, with the Bank of England and ECB expected to follow suit later."

On the UK unemployment data earlier, he says, "what would normally have been a mildly positive release was also caught in the crosshairs of the conflict", as wage inflation slowed.

"However, even at the lower level prices are well above the Bank of England’s target, let alone any inflationary pressure to come over the following months, almost certainly leaving the central bank no option but to sit on its hands for the time being.”

There are only three FTSE 100 names in the green now, BP, up 2% on the back of the soaring oil price and a deal to sell its Gelsenkirchen refinery. (Shell is down 0.4%.)

Diploma, up 0.25% as it continues to attract buyers after yesterday's strong update.

And Rightmove, which is only marginally above flat.

There are more on the FTSE 250, including Ithaca Energy and Harbour Energy, up 8.7% and 4.2%.

IG Group has jumped 5.7% after its results, where the company announced a strategic review and announced a £125 million buyback.

The FTSE 100 has dropped 128 points to 10,177 in the opening few minutes of trading.

There are 91 companies in the red, led by financials and miners.

Precious metals miners Fresnillo and Endeavour Mining are among the bigger fallers, both down around 5% as the gold and silver prices continue to retreat.

With the copper price also sliding, Antofagasta, Anglo American and Rio Tinto are down too.

M&G, NatWest and Standard Chartered are also off.

DFS Furniture has posted interims showing profits more than doubled as it continued to plump up its margins, but the retailer says footfall has softened in the second half.

Underlying pre-tax profit rose 81% to £30.9 million compared to a year earlier, as revenue climbed 8.6% to £547.7 million.

Chief executive Tim Stacey said the results were "reflective of our strengthening business," though he noted that footfall had softened since the half year, which was linked to bad weather and "delicately balanced" consumer confidence.

IG Group has launched a strategic review alongside its results for 2025 where revenue and underlying profits came in higher than expected.

Chief executive Breon Corcoran hailed the record financial results and accelerating customer growth, and said the strategic review was "to ensure IG captures the full long-term opportunity ahead - evaluating routes to maximise shareholder value".

It will examine whether to change where the group is listed, potential acquisitions and possible mergers of parts of the business.

Results of the review are expected in the autumn.

Broader energy prices are spiking too, not just crude oil.

Natural gas prices in Europe are ramping up sharply this morning, after Iran launched attacks on key energy infrastructure across the Middle East.

TTF European natural gas futures soared about 25% to above €68 per MWh, reaching their highest levels in over three years.

Likewise, UK nat gas leapt to 170p per therm, also the highest since 2023 (see chart), but still some way from the sky-high levels seen in 2022.

The FTSE 100 is expected to nosedive more than 100 points on Thursday morning as oil prices continue to soar on Iran's threats of retaliation against its neighbours, making the Bank of England meeting later almost a non-event.

It would extend the London index's rapid decline since midday yesterday, which led to a loss of 98 points by close, finishing at 10,305.29.

US stocks slumped overnight too, with the Dow Jones losing 768 points or 1.6%, the S&P 500 dropping 1.4% and the Nasdaq 1.5%.

The Federal Reserve kept its calm, keeping interest rates unchanged as expected, with 'dot plot' forecasts pointing to one rate cut this year as inflation expectations were revised higher.

Chair Jerome Powell said that it is "too soon" to assess the impact of higher oil prices and that "no one knows" what the impact will be.

This morning, Brent crude stands at $114.77 a barrel, up 6.7% afrter cllimbing from $102 to $109 yesterday.

"The relief in oil markets on news that Iraq would resume exports via Turkey didn’t last long," says market analyst Ipek Ozkardeskaya at Swissquote.

"News that another important Iranian official has been killed and Iranian energy facilities attacked turned the market upside down, as Iran threatened the Gulf countries with fierce retaliation, highlighting that their energy facilities have now become ‘a legitimate target’."

The latest on Thursday was that Qatar reported extensive damage to one of the world’s largest LNG export plants, while Kuwait said a drone attack had caused a fire at one of the biggest refineries in the Middle East.

Reports said a ship was burning off the coast of the UAE and another was damaged offshore Qatar.

Also UK unemployment remained steady at 5.2%, the ONS has revealed, with wage inflation slowing to 3.8% from the previous 4.2%.