UK equities moved higher on Wednesday as strength across major mining companies helped the FTSE 100 overcome a fresh rise in domestic inflation and renewed geopolitical uncertainty surrounding the Persian Gulf.
The FTSE 100 gained 0.06% as of 03:25 ET (07:25 GMT), putting London ahead of a mixed performance across continental Europe. Germany’s DAX slipped 0.12%, while France’s CAC 40 advanced 0.24%. Sterling strengthened 0.15% against the US dollar to 1.3552.
Mining Shares Lead London Market Higher
Mining companies provided much of the support for the FTSE 100, with Rio Tinto (LSE:RIO) and Anglo American (LSE:AAL) among the strongest performers. Glencore (LSE:GLEN) and Antofagasta (LSE:ANTO) also advanced as metals stocks participated in a broader resources rally.
The gains came alongside another increase in crude oil prices and continued geopolitical risk surrounding the Middle East, helping commodity-related shares offset concerns generated by the latest UK inflation figures.
UK Inflation Climbs to Four-Month High
UK consumer price inflation accelerated to 2.9% in the 12 months to July, up from 2.6% in June and matching economists’ expectations. It was the first increase in the annual inflation rate since March.
Energy costs were a major contributor, with gas prices jumping 14.7%, their largest monthly increase since October 2022. The rise followed Ofgem’s decision to increase the household energy price cap by £221 to an annual equivalent of £1,862.
Core inflation remained at 2.6%, rather than easing slightly as economists had anticipated. Services inflation provided a more encouraging signal, declining to 3.4% from 3.6%.
The Office for National Statistics noted that this was the first energy price cap assessment period affected by the Middle East conflict, although the resulting inflationary impact remained relatively concentrated rather than spreading broadly through consumer prices.
Capital Economics deputy chief UK economist Ruth Gregory said the figures showed that “underlying inflation remains contained,” pointing to a fourth consecutive monthly decline in food and drink inflation to 1.3%, its lowest level since August 2024.
Analysts See Limited Pressure for Bank of England Rate Hikes
Capital Economics maintained its forecast that the Bank of England will leave interest rates at 3.75% throughout this year before reducing them to 3.00% next year. That outlook remains considerably below market expectations for rates of between 4.25% and 4.50%.
Jefferies strategist Mohit Kumar said weaker employment figures combined with the inflation data “would help to contain BoE hike expectations,” with domestically generated inflationary pressures remaining relatively subdued despite higher energy costs.
However, Capital Economics warned that the delayed impact of elevated energy prices could lift headline inflation towards 3.5% later this year. Manufacturing PMI output-price indicators also suggest core goods inflation could increase from 0.9% towards 3%.
“It will probably be just a matter of time before this filters through into higher CPI inflation,” Gregory wrote.
Iran Disputes Missile Claims as Regional Tensions Persist
Geopolitical concerns remained another influence on markets after Iran rejected allegations that missiles had been launched from its territory towards the United Arab Emirates.
Iran’s Mehr News Agency quoted foreign ministry spokesman Esmail Baghaei describing the UAE allegations as “completely baseless”. He urged regional governments to avoid “unfounded accusations”, referring to what he characterised as a history of false-flag operations involving the US and Israel.
Meanwhile, Iranian Parliament Speaker Mohammad Bagher Ghalibaf, during a visit to Baghdad for regional cooperation discussions, said Islamic countries should strengthen relations “without foreign interference”.
U.S. President Donald Trump said on Truth Social that “there are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran,” while adding that the naval blockade remains “in full force and effect” and that the Strait of Hormuz is “open and operating.”
Separately, Al Jazeera reported that the U.S. administration had instructed negotiators to pause discussions until Tehran is “ready to make a deal.”
Oil Prices Rise as Markets Track Persian Gulf Risks
Energy markets remained sensitive to developments in the region. Brent crude gained 0.62% to $91.59 per barrel, while WTI advanced 0.67% to $84.62.
Precious metals delivered a mixed performance. Gold futures declined 0.28% to $4,408.26, while spot gold increased 0.46% to $4,354.47.
For the FTSE 100, strength among heavyweight mining shares was sufficient to keep the index in positive territory despite the hotter UK inflation reading and persistent geopolitical uncertainty. Investors remain focused on whether rising energy costs will feed more broadly into inflation and alter expectations for the Bank of England’s next policy moves.
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