The FTSE 100 experienced a modest increase on Tuesday, driven by advancements in the energy sector and significant movements in financial stocks, despite the ongoing conflict in the Middle East. Investors remained attentive to the forthcoming interest rate decision from the Bank of England this week. The blue-chip FTSE 100 rose 0.6% by 1042, while the mid-cap FTSE 250 rose 0.1%.

Ran expanded its strikes on the UAE as the U.S.-Israel war with Tehran entered its third week, disrupting Gulf oil flows through the Strait of Hormuz. U.S. allies declined President Donald Trump’s appeal to assist in reopening the vital waterway, resulting in a 4% increase in oil prices. The energy sector rose 1.1%, trading at a record high. Majors BP and Shell advanced over 1% each, clawing back some ground lost on Monday. Heavyweight banks gained 0.6%, while utilities followed with a 1.4% rise.

British borrowing costs declined for a second consecutive day, yet they continue to be significantly elevated compared to the levels observed prior to the Iran conflict, as markets currently estimate approximately a 50% probability of a Bank of England interest rate increase in November. This week, investors will concentrate on interest rate decisions in the UK, the U.S., and Europe, alongside remarks from policymakers regarding their strategies to address potential inflationary pressures driven by energy costs.

The majority of economists have retracted their predictions for a rate cut in March, now anticipating a 25-basis-point reduction in either April or June. J.P. Morgan anticipates that the Bank of England will maintain its current interest rates until 2026, projecting the next reduction to occur in the first quarter of 2027. Among individual stocks, Close Brothers fell 10.4% to the bottom of the mid-cap index after the lender announced it will cut 600 roles by fiscal 2027. Trustpilot jumped 23% after the global online review platform said it had quadrupled its annual profit.