The UK navigated a landscape of shifting sentiment during April as geopolitical unrest and domestic inflation weighed on the outlook. Although the FTSE 100 Index closed the month higher, its defensive bias and exposure to energy stocks meant it lagged broader international markets.
- CPI inflation rose from 3% to 3.3% YoY
- The BoE maintained rates at 3.75%
- The IMF cut its 2026 UK economic forecast from 1.3% to 0.8%
Defensive tilt tempers gains: the UK navigated a landscape of shifting sentiment during April as geopolitical unrest and domestic inflation weighed on the outlook. Although the FTSE 100 Index closed the month higher, its defensive bias and exposure to energy stocks meant it lagged broader international markets. Over April, the FTSE 100 Index rose by 2% while the FTSE 250 Index climbed by 5.9%.
“The price of Brent crude oil hit its highest level since 2022, briefly surpassing US$126 per barrel”
Inflationary pressures intensify: the UK’s rate of inflation rose from 3% to 3.3% year on year during March, stoked by higher fuel prices, which climbed by 4.9%. The price of Brent crude oil hit its highest level since 2022, briefly surpassing US$126 per barrel amid concerns over a fresh escalating of hostilities between the US and Iran. Looking ahead, the International Monetary Fund (IMF) expects UK inflation to average 3.2% this year, significantly ahead of the Bank of England’s (BoE’s) 2% target.
Rates on hold: as expected, the BoE left its base rate unchanged at 3.75%, but Governor Andrew Bailey commented: “Where we go from here will depend on the size and duration of the shock to energy prices.” Elsewhere, the BoE’s Financial Policy Committee warned that the Middle East war is set to “weigh on growth, increase inflation and tighten financial conditions.” Meanwhile, the British Chambers of Commerce urged the UK government to take action to protect the UK economy from geopolitical shocks, warning: “The UK’s inadequate economic security has become a drag on growth, competitiveness and national strength.”
A blow to the growth outlook: the UK economy grew by 0.5% in February, but stagnated during the final quarter of 2025. The Middle East conflict is set to deliver a particularly severe blow to UK economic growth compared with other G7 economies, according to the IMF . The IMF downgraded its forecast for UK economic growth this year from 1.3% to 0.8%, but predicted that the UK will achieve growth of 1.3% in 2027, outstripping its European G7 peers.
Geopolitical tensions fuel profit warnings: UK-listed companies issued a total of 55 profit warnings during the first quarter of 2026 – 49% of which cited geopolitical uncertainty and policy change. A quarterly study undertaken by EY found that the industry sectors with the highest number of warnings included software and computer services, industrial support services, and travel and leisure.
To view the series of market updates through April, click here
