London’s blue-chip index edged into positive territory on Wednesday, with heavyweight mining shares providing enough momentum to counter a hotter-than-expected domestic inflation reading.
The FTSE 100 (LSE:RIO, LSE:AAL, LSE:GLEN, LSE:ANTO) gained 0.06% as of 03:25 ET, putting London marginally ahead of a mixed session across continental European markets.
Germany’s DAX slipped 0.12% while France’s CAC 40 advanced 0.24%, reflecting the uneven tone across the region as investors weighed inflation data and geopolitical risk.
Sterling strengthened 0.15% against the US dollar to reach 1.3552, providing modest support for domestically focused shares within the index.
Rio Tinto (LSE:RIO) and Anglo American (LSE:AAL) ranked among the strongest performers, joined by Glencore (LSE:GLEN) and Antofagasta (LSE:ANTO) as a broader resources rally lifted the sector.
UK consumer price inflation accelerated to 2.9% in the 12 months to July, rising from 2.6% in June and matching economists’ expectations, marking the first increase in the annual rate since March.
Energy costs were a primary driver, with gas prices jumping 14.7% in their largest monthly increase since October 2022, following Ofgem’s decision to raise the household energy price cap by £221 to an annual equivalent of £1,862.
Core inflation held at 2.6% rather than easing slightly as economists had anticipated, though services inflation provided a more encouraging signal, declining to 3.4% from 3.6%.
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.
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, considerably below market expectations 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 push headline inflation towards 3.5% later this year, with manufacturing PMI output-price indicators suggesting core goods inflation could rise from 0.9% towards 3%.
“It will probably be just a matter of time before this filters through into higher CPI inflation,” Gregory wrote.
Geopolitical tensions in the Persian Gulf 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,” urging regional governments to avoid “unfounded accusations.”
Iranian Parliament Speaker Mohammad Bagher Ghalibaf, speaking during a visit to Baghdad, said Islamic countries should strengthen relations “without foreign interference.”
US President Donald Trump stated on Truth Social that “there are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran,” adding that the naval blockade remains “in full force and effect” and that the Strait of Hormuz is “open and operating.”
Al Jazeera separately reported that the US administration had instructed negotiators to pause discussions until Tehran is “ready to make a deal.”
Brent crude gained 0.62% to $91.59 per barrel while WTI advanced 0.67% to $84.62, as energy markets remained sensitive to the evolving situation in the region.
Gold futures declined 0.28% to $4,408.26 while spot gold increased 0.46% to $4,354.47, reflecting a mixed session for precious metals as investors continued tracking both inflation signals and geopolitical developments.