London shares extended gains on Wednesday, as oil prices retreated, providing some relief to unsettled global markets, while investors anticipated the U.S. Federal Reserve’s rate decision later in the day. The conflict in the Middle East, now entering its third week, continues to escalate, with Israel and Iran ramping up their military operations in the wake of the assassination of Tehran’s security chief. Oil, however, experienced a decline following Iraq’s resumption of exports via the Ceyhan pipeline.

UK’s blue-chip FTSE 100 was up 0.3% by 1044, marking its third consecutive day of gains, while the mid-cap FTSE 250 rose 1%. Aerospace and defence jumped 2% and financials added 1.9%, leading the day’s gains. The energy sector fell 0.6% from Tuesday’s record high. Ithaca Energy opened a new tab, experiencing a decline of 5.2% following the announcement of an annual net loss for the oil and gas producer. In the interim, market participants anticipate that the Federal Reserve will maintain the current interest rate levels. Investors will meticulously analyze the Fed’s outlook for any indications regarding the future trajectory of monetary policy.

In the domestic arena, borrowing costs for the British government have decreased to their lowest level in a week. However, these costs still exceed pre-conflict levels, reflecting ongoing concerns regarding inflation and uncertainty surrounding potential further reductions in Bank of England interest rates. Most economists surveyed by Reuters have revised their predictions regarding a March 19 BoE rate cut, now anticipating a 25-basis-point reduction in either April or June. “Despite energy market developments, we anticipate one 25-bp cut to the BoE’s policy rate on the cards late this year. Moreover, we see fears of a rate hike by the BoE as overdone, given the tendency for central banks to ‘look-through’ energy shocks,” stated Grant Slade.

The expectation is that the Bank of England will maintain the Bank Rate at 3.75% during the upcoming Monetary Policy Committee meeting. Among individual stocks, Diploma surged 18.2% to a record high after the technical products and services distributor raised its fiscal year 2026 guidance. IT firm Softcat opens new tab rose 8.9% after raising its annual profit forecast.