The FTSE 100 has lost all its 2026 gains, closing at 9,918 points, its lowest level since December 2025, amid escalating Middle East conflict. The blue-chip index fell 1.4% on Friday, wiping out earlier gains from a strong start to the year.
UK government borrowing costs have surged to their highest since 2008, with the 10-year gilt yield exceeding 5%. Financial markets now anticipate up to three quarter-point interest rate rises in 2026, following the Bank of England's decision to hold rates at 3.75% while hinting at future increases.
Household energy bills in Great Britain could rise to almost £2,000 a year from July, according to Cornwall Insight, due to higher gas prices driven by the Iran conflict. The forecast of £1,972 is up from £1,800 estimated two weeks ago, and well above the current £1,641 cap.
Petrol and diesel prices have also risen sharply, with average unleaded petrol at 144.51p per litre and diesel at 166.24p. The RAC warns that further increases are likely, potentially reaching 150p for petrol and 180p for diesel by Easter, adding pressure on household budgets.
The US dollar strengthened as a safe haven, pushing the pound down to $1.331. US bond yields also rose amid reports of additional troop deployments to the Middle East. The FTSE 100's fall was led by energy and mining stocks, with BP down 3.6% and Antofagasta down 3.4%.
