Britain’s primary indexes continued to decline on Thursday as a spike in oil prices intensified inflation concerns in light of the ongoing Middle East conflict, prompting traders to reduce their expectations for Bank of England rate cuts. The blue-chip index was down 0.4% by 1057, while the mid-cap index fell 0.3%. Crude prices surged to $100 a barrel earlier in the session following reports of Iranian boats allegedly attacking two fuel tankers in Iraqi waters, indicating that the conflict between Iran and U.S.-Israeli forces remains unresolved.

Oil prices have recently increased by over 6% and have risen more than 32% since the beginning of March. Britain is perceived as more vulnerable than numerous other Western nations to an energy price shock, owing to its constrained public finances and significant dependence on imported gas. The extended duration of the disruption will lead to a more significant effect on energy prices, subsequently influencing global inflation. “This then has implications for interest rates too,” said Danni Hewson.

Money markets have shifted their focus back to the possibility of a BoE rate hike, now estimating a roughly 54% likelihood of a quarter-point increase in borrowing costs come December, in contrast to the expectations of no change earlier this week. Most other FTSE 350 sub-sectors were in the red, but defence and mining, along with utilities, bucked the trend.

A survey indicated that Britain’s housing market has slowed down as demand has diminished from buyers worried about the effects of the Middle East conflict and potential hikes in mortgage rates due to rising energy prices.
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 opens new tab 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.