London’s blue chip index was lower at midday on Thursday, extending earlier losses, following the Bank of England’s decision to hold rates steady amid the ongoing conflict in the Middle East.
The FTSE 100 index was down 251.07 points, 2.4%, at 10,054.22. The FTSE 250 was down 470.25 points, 2.2%, at 21,601.09, and the AIM all-share was down 22.73 points, 3.0%, at 730.48.
The Cboe UK 100 was down 2.4% at 19,418.38, the Cboe UK 250 was down 2.4% at 18,804.16, and the Cboe small companies was down 0.6% at 17,364.66.
The Bank of England left the bank rate unchanged at 3.75% at its March meeting, with the Monetary Policy Committee voting unanimously to hold.
The MPC said the conflict in the Middle East has led to a significant rise in global energy and other commodity prices, which will feed through to households’ fuel and utility bills and indirectly raise costs for businesses. Prior to the shock, there had been ongoing disinflation in domestic prices and wages, but the BoE now expects CPI inflation to be higher in the near term, it said.
The committee stressed that monetary policy cannot directly influence global energy prices, but it aims to ensure that the adjustment to higher prices is consistent with sustainably achieving the 2% inflation target.
The MPC said it is alert to the increased risk of second-round effects in wage and price-setting, noting that the longer elevated energy prices persist, the greater the risk of domestic inflationary pressures.
The pound was quoted at $1.3297 midday Thursday, down from $1.3334 on Wednesday. Against the euro, sterling rose to €1.1583 from €1.1577 a day prior. The euro stood at $1.1477, down from $1.1517. Against the yen, the dollar was trading at JP¥159.08, down from JP¥159.45.
In European equities on Thursday, the CAC 40 in Paris was down 1.7%, while the DAX 40 in Frankfurt was down 2.4%.
The European Central Bank is widely expected to leave interest rates unchanged later Thursday, though the recent spike in oil prices may see President Christine Lagarde strike a firmer tone. The decision is due at 1315 GMT, followed by updated macroeconomic projections and a press conference at 1345 GMT.
In February, the ECB kept the deposit facility rate at 2.00%, the main refinancing rate at 2.15% and the marginal lending facility at 2.40%, marking its fifth consecutive hold. Lagarde has previously said the central bank is in a ‘good place’, with eurozone annual inflation at 1.9% in February, up from 1.7% in January and close to the 2% target.
Brent oil was quoted at $113.97 a barrel at midday in London on Thursday, up from $108.21 late Wednesday.
Gas prices have also climbed sharply in the UK and Europe following the attack on Qatar’s Ras Laffan energy complex. In a strongly worded post, US President Donald Trump warned Iran against further strikes in Qatar after ‘extensive damage’ was reported at facilities there. He also said the US ‘knew nothing’ about Israel’s attack on Iran’s South Pars gas field on Wednesday.
South Pars forms part of the world’s largest natural gas field, jointly operated by Iran and Qatar. Israel has yet to comment.
Energy markets have remained volatile, with Brent hitting as high as $119.07 after Russia’s Gazprom said attacks on the Turkstream and Blue Stream pipelines had been repelled. The pipelines carry gas from Russia to Turkey.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 down 0.1%, and the Nasdaq Composite down 0.2%.
The yield on the US 10-year Treasury was quoted at 4.28%, widening from 4.22%. The yield on the US 30-year Treasury was quoted at 4.90%, widening from 4.86%.
The Federal Reserve left interest rates unchanged late Wednesday, with Chair Jerome Powell signalling that policymakers are unlikely to cut borrowing costs again until inflation shows clearer signs of easing.
Powell said it was too soon to judge the economic impact of higher oil prices, even as markets have priced in rising inflation expectations. He noted that price pressures were already proving stickier than anticipated before the outbreak of war, particularly in goods categories affected by tariffs. Although the Fed raised its inflation forecasts, Powell largely attributed this to the lingering effects of tariffs rather than solely to geopolitical disruption.
Back in London, BP was one of just three blue-chip stocks in positive territory, up 1.5%, supported by higher oil prices and news that it has agreed to sell its Gelsenkirchen refinery and related German assets to Klesch Group Ltd as part of efforts to simplify its portfolio and strengthen its balance sheet.
BP did not disclose the sale price, saying terms are confidential, but expects the deal to be completed in the second half of the year. The disposal will lift its structural cost-reduction target by around $1 billion to between $6.5 billion and $7.5 billion by 2027, reflecting lower operating expenditure tied to the refinery.
This marks the second upward revision to BP’s cost-saving goals, having initially targeted $4 billion to $5 billion in February 2025 and raising this to $5.5 billion to $6.5 billion earlier this year following a strategic review of Castrol.
BAE Systems was down 1.1% after agreeing to sell its remaining roughly $30 million stake in Air Astana JSC. The aerospace and defence firm is placing 6.1 million global depositary receipts, representing 6.9% of Air Astana’s shares, at $5.10 per GDR for total proceeds of $31.2 million. Following the placing, BAE will no longer hold any shares in the Almaty-based airline.
On the FTSE 250, Ithaca Energy was at the top after Goldman Sachs raised its price target to 240 pence from 210 pence with a ’neutral’ rating, while Barclays lifted its target to 200 pence from 100 pence but maintained an ’underweight’ stance.
Among smaller caps, Strategic Minerals rose 12% after raising £4.7 million through a subscription of 134.3 million shares at 3.5p each, led by a prominent international investor. The issue price represents a 16.7% discount to the prior closing mid-price and the 30-day volume-weighted average price. The company said proceeds will accelerate development of its Redmoor tungsten-tin-copper project in Cornwall.
Earlier in the day, UK labour market data came in on the cooler side, potentially reducing the likelihood of a Bank of England rate hike despite higher energy prices.
The unemployment rate remained at 5.2% in the three months to January, slightly below expectations of 5.3%, while employment rose and wage growth slowed, according to the Office for National Statistics.
Dutch bank ING believes the UK economy has ‘changed enormously since the last energy price shock in 2022’.
‘The case for Bank of England rate hikes is much less clear cut,’ ING believes.
‘True, the report is better than expected across unemployment and job creation. But on the latter, as has been the case for much of the post-pandemic era, it is government that is doing most of the leg work in driving growth in payrolled employment.’
Eurozone construction output fell 0.1% month-on-month in January after revised growth of 0.7% in December, Eurostat said. On an annual basis, construction production in the eurozone declined 1.9% in January, compared to 0.7% growth in December.
Separately, EU lawmakers took an initial step towards implementing a trade deal with the US that had been put on hold after the US Supreme Court struck down many of President Trump’s tariffs. The European Parliament’s trade committee voted to cut EU tariffs on some US imports as outlined in an August agreement, though additional safeguards were attached.
Gold was quoted at $4,690.13 an ounce at midday Thursday, down from $4,875.60 on Wednesday.
Still to come on Thursday’s economic calendar are US weekly jobless claims, the ECB interest rate decision, and US new home sales and wholesale inventories.
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