London stocks pare losses as Iran conflict shifts rate bets

FTSE 100 closes lower but steadily recovers from earlier declines as investors weigh impact on inflation and interest rates

Published on Mar. 9, 2026

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Stock prices in London closed lower on Monday, but the FTSE 100 index steadily pared earlier losses throughout the day as investors mulled the impact of the ongoing war in the Middle East on inflation and interest rates. The FTSE 100 closed down 0.3%, while the FTSE 250 and AIM all-share also ended the day lower. Developments in the Iran-Middle East conflict were in focus, with Turkey confirming a second ballistic missile was shot down by NATO defenses in its airspace.

Why it matters

The conflict in the Middle East is raising concerns about its potential impact on global energy supplies and inflation, which in turn is shifting expectations around future interest rate moves by central banks like the Bank of England. This is creating volatility in financial markets as investors try to assess the economic implications.

The details

Brent oil prices spiked as high as $119.25 per barrel on Monday before easing back to around $100 per barrel by the close. The sharp rise in oil prices is fueling fears of higher inflation, which has triggered a sell-off in UK government bond (gilt) markets. Analysts note that this makes further interest rate cuts by the Bank of England less likely, and may even raise the possibility of rate hikes to combat inflation.

  • On Monday, Brent oil traded as high as $119.25 per barrel.
  • By Monday afternoon, Brent oil was trading at $100.02 per barrel.

The players

FTSE 100

The benchmark stock market index of the 100 largest companies listed on the London Stock Exchange.

FTSE 250

The stock market index of the 250 mid-cap companies listed on the London Stock Exchange.

AIM all-share

The stock market index of companies listed on the Alternative Investment Market (AIM) in London.

Bank of England

The central bank of the United Kingdom responsible for monetary policy, including setting interest rates.

Brent oil

A major global benchmark for crude oil prices.

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What they’re saying

“At the very least, we think that additional [Monetary Policy Committee] interest rate cuts are completely off the table for now. Unlike in the euro area, inflation in Britain is already comfortably above target, and the liberalisation of UK markets, the push away from domestic oil production and a limited storage capacity ensure a rapid pass-through from higher oil prices to household energy bills.”

— Matthew Ryan, Analyst, Ebury

What’s next

Investors will be closely watching for any further developments in the Iran-Middle East conflict and its impact on global energy markets and inflation. The Bank of England's next policy decision will also be closely scrutinized for any changes to its interest rate outlook.

The takeaway

The volatility in financial markets caused by the geopolitical tensions in the Middle East highlights the interconnected nature of the global economy and the sensitivity of investors to events that could disrupt energy supplies and stoke inflation. This underscores the challenges facing policymakers as they try to navigate an uncertain economic environment.