London markets climb as investors digest Bank of England's hawkish hold

London's main stock indices climbed about 1.2% after the Bank of England's Monetary Policy Committee voted 6-3 to keep the policy rate at 3.75%, mirroring the July decision. Although the vote was unchanged, the minutes showed a shift toward a more hawkish tone, with five of the six members who backed a hold specifying scenarios—particularly the prolonged Middle East conflict—that could justify tighter policy. Governor Andrew Bailey warned that policy may need to tighten if the conflict persists, and several members mentioned the emergence of second-round inflation effects.

Market participants, including analysts from Citigroup and JPMorgan, now anticipate a quarter-point rate rise in November, with further hikes possible in early 2027. The pound weakened against both the dollar and the euro, while lower oil prices and falling U.S. Treasury yields helped lift equities across Europe and the United States, where the Dow, S&P 500 and Nasdaq all posted gains after the Fed's recent rate increase.