UK stocks gain as easing oil prices lift investor sentiment

UK shares moved higher on Wednesday as hopes of progress in the Iran conflict pushed oil prices lower and improved investor sentiment. Gains in defence companies and upbeat corporate updates also supported the market rally.

The benchmark FTSE 100 index rose 0.2% to 10,509.08 points during mid-session trading.

The index extended gains for an eighth consecutive session.

Meanwhile, the midcap FTSE 250 index advanced 0.8% and moved closer to a three-month high.

Defence stocks gain ahead of UK-Poland treaty

UK defence-related stocks climbed ahead of the signing of a new UK-Polish defence and security treaty on Wednesday.

The agreement forms part of Prime Minister Keir Starmer’s broader efforts to strengthen ties with European nations.

Rolls-Royce gained 2%, while Chemring rose 2.7%.

The broader defence sub-index added 1.3%.

Investor sentiment was also supported by expectations that UK interest rates may not rise as aggressively as previously anticipated.

The FTSE 100 now trades within 4% of its record high reached in late February.

Traders are currently pricing in one quarter-point interest rate increase by the Bank of England before the end of the year.

Markets are also reflecting a 50% probability of another increase of a similar size.

Grocery inflation eases in latest consumer snapshot

The latest reading on UK consumer behaviour showed British grocery inflation slowed to 3.1% in the four weeks to May 17.

The figure marked the slowest pace of increase since December 2024.

The data also suggested that the full impact of the Iran conflict has not yet filtered through to supermarket prices.

Meanwhile, falling crude prices weighed on energy stocks.

Shell and BP both declined around 2%.

The losses followed a drop in oil prices as traders monitored developments in talks between the United States and Iran.

Hollywood Bowl and Pets at Home lift the midcap index

Among individual stocks, Hollywood Bowl surged nearly 15%, making it the top performer on the FTSE 250 index.

The company reported higher spending per game across both its UK and Canadian operations.

It also announced a new £5 million share buyback programme.

Pets at Home climbed 6.2% after the retailer said its sales returned to growth during the fourth quarter.

The company added that momentum had accelerated further since then.

Amazon reaffirms UK investment plans

Separately, Amazon said it invested more than £15 billion in Britain during 2025.

The company stated that the spending keeps it on track to achieve its broader £40 billion investment target through 2027.

Amazon said the investment included expansion of sites, studio operations, and drone delivery trials in Britain, which remains its third-largest global market.