The FTSE 100 closed 25.27 points, or 0.2%, lower at 10,679.99 on Thursday, while the FTSE 250 fell 0.9% to 24,154.32 and AIM declined 1.1%.
European markets were also weaker, with the CAC 40 down 0.5% and Germany’s DAX falling 0.6%. Wall Street remained under pressure by the London close, with the Dow down 0.7%, S&P 500 off 0.5% and Nasdaq 0.8% lower.
The main macro pressure came from the combination of elevated government bond yields and another sharp rise in oil prices. The US 10-year Treasury yield climbed to 5.11% from 5.08%, while the 30-year yield rose to 5.45%.
At the same time, Brent crude jumped to $107.25 a barrel from $102.74 on Wednesday, rekindling concerns that higher energy costs could sustain inflation and keep central banks tightening monetary policy.
Expectations for another 25-basis-point Federal Reserve rate increase next month rose to around 75%, according to market pricing cited in the report, after stronger US activity data reinforced the view that the economy can tolerate higher rates.
Higher oil provided support to London’s energy heavyweights. BP gained 2.6%, Shell rose 1.7% and Ithaca Energy added 2.0%, helping cushion the wider FTSE 100 decline.
Elsewhere, Raspberry Pi surged 20% after reporting record first-half results and forecasting full-year EBITDA ahead of market consensus. JD Sports rebounded 3.4%, while Rentokil Initial fell 4.3% and Computacenter lost 4.4%.
Vistry ended down 3.1% after outlining a restructuring plan that will reduce its operating regions and target around 12,000 annual completions over the medium term.
The sharper market implication is that the current weakness is increasingly being driven by macro conditions rather than isolated corporate disappointments. If oil remains above $100 and US Treasury yields stay around 5% or higher, equity valuations are likely to remain under pressure even if company earnings remain resilient, leaving energy shares relatively supported while property, consumer, technology and highly leveraged companies face a tougher backdrop.
Investor takeaway: London equities remain caught between support from energy stocks and pressure from rising bond yields. Brent above $107 is boosting BP and Shell, but higher borrowing costs and renewed inflation risk are weighing more broadly on valuations, particularly across the FTSE 250 and other rate-sensitive shares.
