London midday: FTSE extends losses as bond selloff continues

(Sharecast News) - London stocks had extended losses by midday on Wednesday as the selloff in the bond market continued, amid renewed hostilities between the US and Iran.

The FTSE 100 was down 0.7% at 10,715.68, while Brent crude was up 0.5% at $95.11 a barrel and West Texas Intermediate was 0.2% higher at $90.37 after the US launched a new series of strikes against Iranian targets, prompting Tehran to retaliate with strikes on US bases in Bahrain, Jordan and Iraq.

Meanwhile, the selloff in the bond market continued, with the yield on the 10-year gilt up four basis points at 5.26% and the yield on the 30-year gilt six basis points higher at 5.92%.

Dan Coatsworth, head of markets at AJ Bell, said: "Global stock markets continue to be troubled by inflation fears as tensions escalate in the Middle East.

"Bringing markets down is a cocktail of worries around the scale of interest rate hikes that could be around the corner, geopolitical concerns, and fears that economic growth expectations might have to be revised down.

"Oil prices remain stubbornly high amid fighting in the Middle East and fears of supply disruptions. Brent crude oil is now hovering around $95 a barrel, nearly 20% higher than a month ago. That has major implications for businesses and consumers, pushing up the cost of goods and services, as well as energy.

"Investors are now staring directly into the eyes of an inflation monster that threatens to become stronger unless action is taken. Central banks typically raise interest rates to fight inflation, and market expectations for the scale of rate hikes continues to evolve.

"The market is now pricing in a 70% chance the Federal Reserve will raise interest rates in the US later this month, a 59% chance of another hike in October, and possibly one more in December.

"It's a trio of pain this side of the Atlantic as well. Investors are pricing in one UK interest rate hike by the Bank of England this November, a second next February and a third by June.

"Having yesterday hit its highest since the global financial crisis at 5.26%, the benchmark 10-year gilt yield eased back slightly to 5.18%. That's still significantly high enough to cause Chancellor John Healey sleepless nights before he's even had a chance to present his first Budget.

"Bonds are reaching the point where certain investors may seek to lock in high yields caused by the latest market volatility. What might be holding them back is an expectation that yields could get even higher if rates go up fast and hard, meaning certain bond investors could be playing a waiting game before piling in."

In equity markets, oil giant BP was in focus as it announced that Ian Tyler has been appointed chairman, taking up the role immediately following an extensive search that considered both internal and external candidates. Tyler joined the board as a nonexecutive director in April 2025 and became interim chair in May 2026.

Halma edged higher as it agreed to acquire Pyxis, a USbased specialist in waterquality monitoring technology, in a deal worth an initial $170m (£126m). Halma said that further earnout payments of up to $30m may be made depending on Pyxis' performance over the next two financial years.

Educational publisher Pearson lost ground after a downgrade to 'neutral' from 'buy' at Citi. "At the current valuation, the shares fairly reflect the balance of operational momentum with limited upside to short-term consensus," the bank said.