London’s blue-chip index defied geopolitical uncertainty and a European interest rate hike to close firmly in positive territory on Thursday.
The FTSE 100 ended the session up 49.07 points, or 0.5%, at 10,303.88, while the FTSE 250 gained 19.30 points, or 0.1%, to close at 22,970.64.
The AIM All-Share bucked the broader trend, slipping 1.42 points, or 0.2%, to finish at 770.96.
“Despite continuing uncertainty about the fate of any peace deal in the Middle East, the FTSE 100 forged ahead on Thursday,” said AJ Bell investment director Russ Mould.
US president Donald Trump intensified his rhetoric on the Middle East, vowing “very hard” strikes on Iran and threatening to target the country’s key oil infrastructure.
He pushed for a permanent peace deal, warning of “bigger, more powerful” attacks as negotiations over a nominal ceasefire continued to stall.
Oil markets remained largely unmoved, with Brent crude for August delivery trading flat at 92.95 dollars a barrel, barely changed from 92.98 dollars at Wednesday’s London equities close.
The European Central Bank raised interest rates by 25 basis points, a widely anticipated move, with ECB president Christine Lagarde describing the decision as “unanimous without reservations.”
“The war in the Middle East is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve and affect the medium-term outlook for the euro area,” the ECB said.
Lagarde was clear the move was not an “insurance hike,” stating: “It’s a good monetary policy interest rate decision. I don’t need to characterise it as credibility, insurance or anything else for that matter.”
ING analysts characterised the hike as “more of a symbolic move,” arguing the risk of falling behind the curve outweighed any potential damage to eurozone growth.
European equity markets also moved higher, with Paris’s CAC 40 gaining 0.5% and Frankfurt’s DAX 40 rising 0.1% on the day.
The ECB decision comes ahead of a busy week of central bank meetings, with rate decisions expected from the UK, US, Japan, and Australia among others.
In domestic politics, Defence Secretary John Healey resigned, accusing Prime Minister Sir Keir Starmer of failing to properly fund the Defence Investment Plan.
Shares in defence companies initially fell on the news before recovering, with BAE Systems (BA.L) closing up 0.1% and Babcock International (BAB.L) finishing 1.4% higher.
Asia-focused financials were among the session’s strongest performers, with Standard Chartered (STAN.L) rising 3.4%, Prudential (PRU.L) gaining 2.5%, and HSBC (HSBA.L) climbing 2.2%.
UBS reiterated a buy rating on Prudential, stating it believes a “potential downside scenario is already priced in” for the insurer.
Halma (HLMA.L) was the session’s sharpest faller, with shares plunging 15% despite strong results after guidance for its photonics business disappointed investors.
The photonics division, which grew at 52% in financial 2026, is expected to slow to 30% growth in financial 2027, falling short of more optimistic market expectations.
The pound slipped to 1.3342 dollars on Thursday afternoon from 1.3397 on Wednesday, while US markets moved higher with the Dow Jones up 0.6% and the S&P 500 rising 0.2%.