FTSE 100 Rises as Fed Rate Hike and Easing Tensions Boost Sentiment

UK stocks advanced on Thursday, with the benchmark FTSE 100 index gaining as investor sentiment improved following a key U.S. interest rate decision and reduced geopolitical tensions. The positive mood in London was mirrored across Europe, with Germany’s DAX and France’s CAC 40 also posting gains.

As of 03:12 ET (07:12 GMT), the FTSE 100 was up 0.71%, according to Investing.com data. The British pound also edged higher, with sterling up 0.10% against the dollar at $1.3398.

Central Banks in Focus

The market's upward momentum came after the U.S. Federal Reserve raised its key interest rate by 25 basis points on Wednesday to a range of 3.75% to 4.00%, its first hike in over three years. The central bank also signaled one more increase before a potential long-term hold, providing a degree of clarity that investors welcomed.

Attention now shifts to the Bank of England (BoE), which is set to announce its own policy decision later Thursday. The BoE is widely expected to keep its main rate on hold at 3.75% in what analysts predict will be a 6-3 vote. This comes after UK inflation recently ticked up to 3.1%, driven by rising fuel costs. However, James Smith of ING commented that there is "very little sign" the energy shock is broadening into core inflation.

Geopolitics and Commodity Prices

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Easing geopolitical risk also contributed to the optimistic sentiment. Reports cited U.S. President Donald Trump stating he is "hopefully” toward the end of the conflict with Iran and has spoken "directly" with Tehran. This was supported by Reuters ship-tracking data showing a sharp drop in vessel traffic through the Strait of Hormuz.

The apparent de-escalation, combined with reports that Saudi Arabia offered extra crude supplies to global markets, weighed on oil prices. Brent crude fell 2.07% to $103.64 a barrel, while WTI crude dropped 1.68% to $100.72.

Corporate Movers

Several UK-listed companies saw significant share price movements based on corporate announcements:

• Next PLC (NXT) raised its 2026-27 profit guidance by £12 million to £1.255 billion, marking its fourth upgrade this year after strong summer sales lifted first-half profit by 10.5%.
• Drax Group (DRX) said it expects its 2026 adjusted EBITDA to be around the top end of analyst consensus, helped by strong summer operations.
• Capricorn Energy (CNE) agreed to a revised takeover offer from Norway’s DNO valuing the company at $396 million, after DNO increased the cash component of its bid.