London’s main indexes close higher

The blue-chip FTSE 100 ‌closed up 1.8%, while the midcap FTSE 250 jumped 2.2%

London’s main indexes closed higher on Wednesday, prompting investors to scale back expectations ​for further interest rate hikes by the Bank of England.

The blue-chip FTSE 100 ‌closed up 1.8%, while the midcap FTSE 250 jumped 2.2%. On Tuesday, both the indexes marked their biggest monthly decline since 2020 on fears that the war-led increase in oil prices will stoke inflation.

Interest rate futures were fully pricing in one ​25 basis-point increase in the BoE’s bank rate by the end of 2026, and the possibility of ​a second compared, with two or three hikes previously.

Bank of England Governor Andrew Bailey said that markets were still getting ahead of themselves by pricing in interest rate hikes by the central bank, which wanted to ​avoid adding to the damage Britain’s economy would face from the Iran war.

Most FTSE 350 ​sub-sectors traded in the green except energy, which dropped from record highs, down 4.2% after oil slipped amid ‌Middle ⁠East volatility.

Aerospace and defence also added to gains, up 5.7%, providing the biggest boost to the benchmark index.

Heavyweight banks also added 5.2%, with NatWest Group, TBC Bank Group and Lloyds Banking Group up between 5.4% and 5.8%.

Prime Minister Keir Starmer said that the global instability caused by the Iran war ​meant Britain should pivot ​to focusing on closer economic ⁠and defence ties with Europe.

Britain’s food prices will be rising by nearly 10% by the end of 2026 due to the Iran war, ​the country’s food and drink manufacturers’ lobby warned, around three times faster ​than its ⁠previous forecast.

British factory cost pressures soared in March, and delivery delays – due to ships avoiding the Strait of Hormuz – were the longest since mid-2022, according to an S&P Global survey.