March 19 (Reuters) - London's main indexes fell sharply on Thursday as an intensifying conflict in the Middle East sapped risk appetite, with investors also keeping a close eye on the Bank of
UK's FTSE 100 closes at 2-month low as investors weigh BoE rate decision and Iran war
Market Reaction to Bank of England Decision and Middle East Conflict
By Tharuniyaa Lakshmi
March 19 (Reuters) - London’s main indexes closed at multi-month lows on Thursday after the Bank of England’s unanimous decision to leave rates unchanged, while the intensifying Middle East conflict also suppressed risk appetite.
FTSE 100 and FTSE 250 Performance
The blue-chip FTSE 100 finished at its lowest in about two months, down 2.4%.
The mid-cap FTSE 250 was also down 2.4%, its lowest level since November last year.
Bank of England's Policy and Inflation Concerns
The BoE kept borrowing costs on hold as expected, warning of inflation risks from the war in the Middle East. Some of the policymakers also raised the prospect of raising rates.
Expert Commentary
"A low interest rate environment is beneficial for taxpayers and businesses alike, but the risk of inflation is a more important battle at this point," said Nick Saunders, CEO of online investment platform Webull UK.
"The Bank cannot afford to fight a battle on two fronts."
Central Bankers' Global Response
Bank of England and European Central Bank
CENTRAL BANKERS ARE CAUTIOUS
Traders are pricing in two 25-basis-point rate hikes by the year-end.
Meanwhile, the European Central Bank kept its key interest rate unchanged, also acting cautiously because of the war.
U.S. Federal Reserve
On Wednesday, the U.S. Federal Reserve held rates steady and stuck to its projection for one cut in 2026.
Sector and Stock Performance
Energy Sector
In the UK market, the energy sector was the only one to trade in a positive territory, rising 1.6% as oil prices jumped after Iran attacked energy facilities across the Middle East following Israel's strike on its South Pars gas field, a major escalation in the war. [O/R]
BP and Corporate Moves
BP gained 4.9%. The oil giant agreed to sell its Gelsenkirchen refinery to Klesch Group and raised its cost‑cutting target.
Labour Market Data
Earlier in the day, data showed that British wages rose at their slowest pace since late 2020 in the three months to January, according to official data that also suggested a weakening in employment might have bottomed out before the start of the war in the Middle East.
Other Major Movers
Of the 100 stocks on the FTSE 100, 97 finished in the red. Metal miners and banks were down 7.8% and 4.3% respectively, making them the day’s worst performers.
HSBC Job Cuts
HSBC dropped 3.1% after Bloomberg reported that the bank is considering job cuts of up to 20,000 roles.
(Reporting by Tharuniyaa Lakshmi in Bengaluru; Editing by Nivedita Bhattacharjee and Barbara Lewis)
