London equities moved modestly higher on Wednesday, with the FTSE 100 marginally outperforming parts of Europe as a sector-led rally in miners offset fresh inflationary data and a flare-up of regional geopolitical risk.
As of 03:25 ET (07:25 GMT) the FTSE 100 was up 0.06%. By comparison, Germany's DAX declined 0.12% while France's CAC 40 rose 0.24%. Sterling strengthened 0.15% to 1.3552 against the US dollar.
The driving force behind the late-morning recovery in London came from metals names. Rio Tinto and Anglo American were the top performers on the index, with Glencore and Antofagasta also rising. Analysts and traders linked the broad-based metals advance to a continued uptick in oil prices combined with a residual geopolitical risk premium in global commodities markets.
Domestic price pressures re-emerged in the official UK data for July. Consumer price inflation increased to 2.9% in the 12 months to July, up from 2.6% in June, the Office for National Statistics reported. A sharp monthly jump in gas prices of 14.7% was the principal contributor to the increase, the biggest single-month rise since October 2022. This followed Ofgem's decision to raise the household energy price cap by to an annual equivalent of
Despite the energy-driven lift in headline inflation, the CPI result broadly matched economists' forecasts. Core inflation remained unchanged at 2.6%, in contrast to some expectations for a marginal easing, while services inflation moderated to 3.4% from 3.6%. The ONS highlighted that the energy cap assessment period was the first to be affected by the recent conflict in the Middle East, but said the pass-through into UK prices so far appeared concentrated rather than broad-based.
Market economists interpreted the data as a mixed signal for monetary policy. Capital Economics deputy chief UK economist Ruth Gregory said the report confirmed that "underlying inflation remains contained," pointing to a continued decline in food and drink inflation to 1.3%, the lowest reading since August 2024. The broker maintaining a call that the Bank of England will keep interest rates at 3.75% this year and cut to 3.00% next year was noted, a forecast that sits well below prevailing market pricing of 4.25% to 4.50%.
Jefferies strategist Mohit Kumar observed that softer UK employment figures together with the CPI release "would help to contain BoE hike expectations," suggesting domestically generated inflation pressures remain limited at present even as energy costs rise.
Capital Economics offered a cautionary caveat: the lagged impact of elevated energy prices could push CPI toward about 3.5% later in the year. The firm also pointed to manufacturing PMI output prices as signalling that core goods inflation could climb from roughly 0.9% toward 3%, writing that "it will probably be just a matter of time before this filters through into higher CPI inflation."
Geopolitical noise around the Persian Gulf added another dimension to market moves. Iran's Mehr News Agency reported Tehran rejected as "completely baseless" claims from the UAE that missiles had been launched from Iranian territory toward the Emirates. Foreign ministry spokesman Esmail Baghaei urged regional parties to avoid "unfounded accusations," invoking a history of alleged false-flag operations by the US and Israel. Separately, Iranian Parliament Speaker Mohammad Bagher Ghalibaf, on a visit to Baghdad, said Islamic countries must deepen ties "without foreign interference."
On the US side, President Donald Trump posted on Truth Social saying that "there are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran," and asserting that a naval blockade remains "in full force and effect" while the Strait of Hormuz is "open and operating." Al Jazeera reported that the administration had asked negotiators to pause until Tehran is "ready to make a deal."
Commodities showed price responses consistent with the mix of regional tensions and rising energy costs. Brent crude rose 0.62% to $91.59 a barrel, while West Texas Intermediate gained 0.67% to $84.62. In precious metals, gold futures fell 0.28% to $4,408.26 even as spot gold ticked up 0.46% to $4,354.47.
Market snapshot and implications
- Equities: FTSE 100 modestly higher, with miners strongest contributors.
- FX: Sterling firmed against the dollar.
- Commodities: Oil prices rose on Gulf-related risk, supporting miners; gold showed mixed signals between futures and spot markets.