The FTSE 100 closed Friday at 10,261, down 0.43% on the session and off 0.2% for the full week, dragged down by a painful combination of weak domestic economic data and surging oil prices from the Iran war.
The UK economy stalled entirely in January, posting 0.0% growth against an expectation of 0.2%, while production activity fell 0.1% and services flatlined over the same period.
GDP grew just 0.2% over the three months to January, also below forecasts of 0.3%, leaving the Bank of England in a near-impossible position heading into its March meeting this week.
Before the Iran conflict intensified, markets had expected the Bank to cut rates at least once or twice in 2026 as inflation appeared to be easing gradually back toward the 2% target.
That expectation has been comprehensively unwound. Markets are now pricing roughly an 80% chance of a 25 basis point rate hike by year-end, the first increase in several years, driven entirely by energy price pass-through to consumer prices.
The FTSE’s peak of 10,934.94 was reached on February 27 — just one day before the US and Israeli strikes on Iran began — making the timing of the index’s reversal almost surgically precise.
The index has fallen 7.1% from that record, putting it within 3% of the technical definition of a correction, which requires a 10% or more drawdown from a prior peak.
Oxford Economics has identified $140 per barrel as the threshold above which the global economy tips into mild recession, reducing world GDP by around 0.7% by year-end and pushing the UK, Eurozone and Japan into contraction.
The FTSE’s heaviest individual fallers on Friday included Fresnillo down 5.56%, Antofagasta down 5.50%, and Rolls-Royce dropping 5.18%, while defensive names including Hikma Pharmaceuticals, Imperial Brands, and Bunzl ended in positive territory.
The irony of Friday’s session was that some of the UK’s biggest oil producers — Shell and BP — actually rose modestly as crude topped $100, with Shell gaining 1.7% to 3,188p and BP adding 1.3% to 505.5p, producing a split market that reflected the divergent fortunes of different sectors within the same index.
The Bank of England’s meeting on Thursday this week is the most closely watched domestic policy event since the inflation crisis of 2022, with the vote split expected to run either 7-2 or 6-3 in favour of holding rates while signalling that the direction of travel may be changing.
For the FTSE 100, which had been one of the world’s best-performing major indices in 2025 — ending the year up roughly 18% — the speed and scale of the reversal is a reminder that an index heavily weighted toward financials, miners, and energy companies is never as immune to macro shocks as its relative recent strength might suggest.