Finance
UK benchmarks set for weekly loss as mideast war hits rate-cut hopes
Published by Global Banking & Finance Review®
Posted on March 13, 2026
3 min readLast updated: March 13, 2026
Quick Summary
London’s FTSE 100 and FTSE 250 dropped on March 13 amid escalating Middle East tensions that dented hopes for Bank of England rate cuts, while energy stocks rose and UK GDP stagnated in January, reinforcing concerns over policy delays.
UK Stock Indexes Extend Weekly Losses Amid Middle East Tensions & Inflation Fears
By Tharuniyaa Lakshmi
Market Performance and Economic Impact
March 13 (Reuters) - London's main stock indexes extended declines on Friday, as the Middle East conflict heightened inflation fears that clouded the Bank of England's monetary policy outlook, while energy firms gained on higher oil prices.
Stock Index Movements
The blue-chip FTSE 100 was down 0.3% by 1058 GMT, while the mid-cap FTSE 250 fell 0.7%. Both indexes were on track for a second weekly loss.
They tracked movements in global markets, which slid as the U.S.-Israel war on Iran neared two weeks and showed no signs of de-escalation.
Geopolitical Tensions and Market Reaction
Markets are bracing for a drawn-out conflict, with U.S. President Donald Trump escalating rhetoric against Iran, and Tehran pledging to keep the Strait of Hormuz shut.
Sector Performance
Energy Sector Gains
UK heavyweight energy index was up 1.3% with oil majors BP and Shell up 1.5% and 1.3%, respectively, as crude prices traded above $100 a barrel. [O/R]
Mining and Other Sectors
Most other sub-indexes were in the red, with miners down 2.1%, making them the day’s worst performers.
Economic Data and Outlook
GDP and Economic Risks
Meanwhile, ONS data showed Britain’s economy stalled in January, with flat GDP, weak services and rising energy‑price risks from the Iran conflict, deepening investor worries.
Expert Commentary
"If the Strait of Hormuz re‑opens by the end of March, the economic fallout should be limited, but a prolonged closure and persistently high energy prices pose the real risk," said Jonathan Stubbs, analyst at Berenberg.
Monetary Policy Expectations
Money markets have erased hopes of a March rate cut from the Bank of England, according to LSEG data.
BofA has pushed its expected first BoE rate cut to June due to energy‑driven inflation risks, joining Goldman Sachs, Standard Chartered and Morgan Stanley in delaying easing forecasts amid the Iran‑linked surge in oil prices.
"Needing to avoid a depreciation in the pound that makes inflation worse, the Bank of England would likely shelve interest rate cuts for the rest of the year,” said Stubbs.
Individual Stock Movers
Among individual stocks, HSBC and Standard Chartered fell 1% each as both are heavily invested in the Gulf’s rise as a global finance hub, and have seen operations disrupted as the Iran conflict rattles their Middle East ambitions.
(Reporting by Tharuniyaa Lakshmi in Bengaluru; Editing by Harikrishnan Nair)
Key Takeaways
- •FTSE 100 fell ~0.3%, FTSE 250 down ~0.7%, both headed for second consecutive weekly decline as markets absorbed geopolitical risks. (brecorder.com)
- •Energy sector outperformed with crude over $100/barrel; BP and Shell gained around 1.3–1.5%, while miners slumped ~2.1%. (investing.com)
- •January GDP contracted around 0.1% month‑on‑month, pointing to weak industrial and construction output despite modest services growth, undermining confidence in near‑term BoE rate cuts. (investing.com)
References
Frequently Asked Questions about UK benchmarks set for weekly loss as Mideast war hits rate-cut hopes
1Why are UK stock indexes falling this week?
UK stock indexes are down due to rising inflation fears driven by the Middle East conflict, which has delayed expectations for Bank of England rate cuts.
2How has the Middle East conflict impacted the UK economy?
The conflict has pushed up oil prices, increased inflation risks, stalled UK GDP growth, and created market uncertainty.
3Which sectors gained and lost the most on the UK stock market?
Energy firms like BP and Shell gained on higher oil prices, while miners were the worst performers, falling 2.1%.
4What is the outlook for Bank of England interest rate cuts?
Most analysts now expect the Bank of England to delay rate cuts until June or later, due to energy-driven inflation risks linked to the Iran conflict.
5How are banks like HSBC and Standard Chartered affected?
HSBC and Standard Chartered shares fell 1% each, as their Gulf region operations face disruption amid the Iran conflict.