The UK’s blue-chip FTSE 100 index is set to open lower on Wednesday morning, according to futures data from IG.
Bank of England Governor Andrew Bailey sparked fresh speculation over further interest rate hikes when he told MPs that risks to inflation remain “on the upside.”
Bailey warned that energy prices “could be higher still” in coming months, as the Strait of Hormuz remains largely blocked following escalating regional conflict.
Oil prices climbed during late Tuesday trading to reach their highest level since July 23, with Brent crude rising by nearly one per cent to just below $98 per barrel.
The latest surge in crude prices came after Saudi Arabia’s state-run press agency reported that attacks by Iran-backed Houthi militants on several energy facilities had wounded a number of people.
Dan Coatsworth, AJ Bell’s head of markets, warned that rising oil prices risk spooking global markets by stoking fears that interest rates will remain higher for longer.
Coatsworth said: “History suggests investors should be alert rather than alarmed when oil trades above $90 per barrel. The impact on markets depends not only on the oil price itself, but also on why it is rising and how long it remains elevated.”
Ahead of the latest economic growth figures due later this week, food industry leaders have issued a stark warning that the full impact of the Iran war is yet to be felt.
The Food and Drink Federation has said that food inflation will soar to four per cent later this year and above six per cent by next summer, as higher supply chain and energy costs feed through.
The federation attributed the expected surge in food prices directly to the closure of the Strait of Hormuz, which has significantly disrupted global supply chains.
Central banks across major economies face mounting pressure to keep borrowing costs elevated as energy market disruption continues to fuel broader inflationary trends throughout 2026.