Finance
UK equities extend drop as oil surge intensifies inflation concerns
Published by Global Banking & Finance Review®
Posted on March 12, 2026
2 min readLast updated: March 12, 2026
Quick Summary
UK equities extended losses as oil prices surged past $100 amid heightened Middle East conflict, stoking inflation fears and dampening hopes for Bank of England rate cuts; markets now even price in a potential year‑end rate hike, with housing and banks feeling the strain.
UK Stocks Extend Losses as Oil Surge Fuels Inflation and Rate Hike Fears
By Tharuniyaa Lakshmi
Market Reaction to Oil Price Surge and Inflation Concerns
March 12 (Reuters) - Britain's main indexes extended losses on Thursday as a surge in oil prices heightened inflation worries amid the ongoing Middle East conflict and led traders to scale back expectations of Bank of England rate cuts.
The blue-chip FTSE 100 was down 0.4% by 1057 GMT, while the mid-cap FTSE 250 fell 0.3%.
Oil Prices and Middle East Conflict
Crude prices climbed back to $100 a barrel earlier in the session after Iranian boats appeared to have attacked two fuel tankers in Iraqi waters, as the conflict between Iran and U.S.-Israeli forces looked far from resolved. [O/R]
Oil prices were last rising more than 6% and are up more than 32% since the start of March.
Impact on the UK Economy
Britain is seen as more exposed than many other Western countries to an energy price shock due to its stretched public finances and its heavy reliance on imported gas.
"The longer the disruption goes on, the greater the impact on energy prices and in turn global inflation. This then has implications for interest rates too," said Danni Hewson, head of financial analysis at AJ Bell.
Bank of England Rate Hike Expectations
Money markets returned to betting on a BoE rate hike, pricing in a roughly 54% chance of a quarter-point rise in borrowing costs in December, compared with expectations of no change on Wednesday.
Sector Performance and Market Movers
Most other FTSE 350 sub-sectors were in the red, but defence, mining, and utilities bucked the trend.
Housing Market and Consumer Sentiment
A survey from RICS showed Britain's housing market has lost steam as demand faded from buyers concerned about the implications of the Middle East conflict and possible increases in mortgage rates on the back of energy price rises.
Notable Stock Moves
Among other movers, HSBC fell 5.8% after the bank closed all branches in Qatar until further notice amid the Middle East conflict.
TP ICAP rose 7.3% to the top of the mid-cap index after the inter-dealer broker posted a 3.6% rise in annual pre-tax profit.
(Reporting by Tharuniyaa Lakshmi in Bengaluru; Editing by Shreya Biswas)
Key Takeaways
- •Brent crude topped $100 per barrel for first time since 2022 as Iran‑linked shipping attacks intensified, prompting release of 400 million barrels from IEA reserves—yet prices kept rising(apnews.com)
- •FTSE 100 fell ~0.4% and FTSE 250 ~0.3% as traders scaled back expectations of BoE rate cuts; December BoE hike odds climbed to ~54%(bbc.bm)
- •HSBC shares dipped after announcing closure of all Qatar branches amid regional tensions; contrastingly, TP ICAP gained ~7.3% after reporting higher annual pre‑tax profit(wtaq.com)
References
- Brent crude oil briefly tops $100 a barrel as Iran attacks on shipping worsen supply concerns
- London’s FTSE indexes fall as rate-cut bets fade and oil surge renews inflation fears |
- Citi, StanChart evacuate Dubai offices, HSBC closes Qatar branches as fears grow | WTAQ News Talk | 97.5 FM · 1360 AM | Green Bay, WI
Frequently Asked Questions about UK equities extend drop as oil surge intensifies inflation concerns
1Why are UK equities falling?
UK equities are dropping due to a surge in oil prices driven by Middle East conflict, increasing inflation concerns and reducing expectations of Bank of England rate cuts.
2How are oil prices affecting inflation in the UK?
The sharp rise in oil prices is heightening inflation worries, as the UK relies heavily on imported energy, making it more susceptible to energy price shocks.
3What are the new expectations for Bank of England rate changes?
Traders are now anticipating a 54% chance of a quarter-point rate hike by December, compared to no change expected previously.
4Which sectors outperformed despite the market decline?
Defence, mining, and utilities were the few FTSE 350 sub-sectors that outperformed amid the broader market decline.
5How did the Middle East conflict impact UK banking stocks?
HSBC shares fell 5.8% after closing all branches in Qatar due to safety concerns arising from the Middle East conflict.