London's stock markets experienced notable losses on Thursday as an escalation in the Middle East reduced risk appetite and investors awaited a key Bank of England announcement.
By 1020 GMT the benchmark blue-chip index, the FTSE 100, had slipped 1.9%. The mid-cap FTSE 250 fell 2%, marking its lowest level since November of last year. Most sectors traded lower during the session, with the exceptions concentrated in energy.
The energy sector rose 0.9%, reaching a record high as oil prices jumped following an attack by Iran on energy facilities across the Middle East. The action followed Israel's strike on the South Pars gas field, and market participants treated the sequence as a significant escalation in the conflict.
Outside energy, metal miners and banks were the weakest sectors, dropping 7.2% and 3.7% respectively and representing the worst performers on the day. In individual stock moves, HSBC fell 2.7% after reports that the bank is considering cuts of up to 20,000 roles.
Investors were also focused on the Bank of England's policy decision due at 1200 GMT. In light of recent developments, the central bank now appears likely to delay an interest rate cut that had been widely anticipated before the escalation in the Middle East. The BoE is expected to take a cautious stance in its statement - refraining from a clear signal on next steps while it assesses any potential inflationary effects stemming from the regional conflict.
Separately, official data showed that British wages increased at the slowest pace since late 2020 in the three months to January. The same dataset also indicated that a weakening in employment may have bottomed out prior to the start of the current Middle East hostilities.
Among other notable movers, IG Group climbed 5.5% to a record high after announcing it is exploring deals, partnerships and a potential relocation from London to access faster-growing markets.
Market context: Volatility was driven by geopolitical developments that pushed commodity-linked names higher while weighing on cyclical and financial stocks. Attention was concentrated on the BoE's near-term policy choices as policymakers balance domestic wage and employment signals against external inflation risks.