March 9 (Reuters) - UK stocks fell to their lowest levels in nearly two months on Monday as rising oil prices intensified inflation fears and concerns over potential interest rate hikes amid ongoing
London's FTSE indexes fall as oil prices soar, inflation concerns mount
Market Performance and Economic Impact
March 9 (Reuters) - UK stocks closed at their lowest levels in about five weeks on Monday as rising oil prices intensified inflation fears and concerns over potential interest rate hikes amid the U.S.-Israeli war on Iran.
FTSE Indexes and Market Trends
The blue-chip FTSE 100 slipped 0.3%, while the mid-cap FTSE 250 lost 1.8%. Both indexes dropped for the third straight day.
The benchmark index has now fallen about 7% from its record high hit on February 27 as tensions escalated in the Middle East.
Political Developments in Iran
Iran named Mojtaba Khamenei to succeed his father Ali Khamenei as supreme leader, signalling that hardliners remain firmly in charge in Tehran.
Oil Prices and Energy Sector Response
Shares of oil majors rose, with Shell firming 2.4% and BP up 2.2%, tracking crude prices that hit their highest since 2022, briefly breaking above $119 a barrel on concerns over prolonged shipping and supply disruptions stemming from the widening conflict. [O/R]
The UK's energy index gained 2.3%.
Inflation and Bank of England Policy
Soaring energy prices have renewed inflation worries and prompted a sharp pullback from February when two Bank of England rate cuts were priced in.
Money markets largely expect the Bank of England to leave interest rates unchanged for the rest of the year as the war drives up energy costs and raises the spectre of another inflation wave. [BOEWATCH]
Government Response and Fiscal Concerns
Traders were also weighing the potential costs of fresh government support for energy bills after Prime Minister Keir Starmer said easing the cost-of-living strain was at the top of his mind.
Any new support would further strain public finances and erode the buffer the government has to protect its fiscal rules.
Currency and Employment Data
British borrowing costs surged sharply, while sterling tumbled on Monday. [GBP/]
Labour Market Trends
Adding to the gloom, the latest REC/KPMG report on jobs indicated that starting salaries for permanent staff in Britain continued to decline, albeit at a slower pace, while the downturn in new permanent hires showed signs of easing.
(Reporting by Tharuniyaa Lakshmi in Bengaluru; Editing by Vijay Kishore and Ros Russell)
