London stocks slide as rising gilt yields weigh; Reckitt gains

London's FTSE indices experienced a decline on Tuesday due to Middle East tensions driving global bond yields higher, fueled by inflation concerns. The FTSE 100 index dropped 1% to a two-week low of 10,725.6 points, while the FTSE 250 declined 1.9% and was near a one-month low. The midcap index was on track to record its biggest one-day drop since March.

The U.S. and Iran's continued tensions sent Brent crude prices soaring to over $92 a barrel, sparking a global bond selloff as investors assessed the potential impact on the world economy. The UK 10-year Gilt yield hit its highest level since 2008, with the Bank of England potentially raising interest rates by at least 32 basis points by year end, up from around 24 basis points the previous week.

Rate-sensitive sectors suffered the most, with Barclays shares falling 3.4%, Standard Chartered dropping 1.4%, and Prudential losing 1.3%. Housing and construction stocks also declined by 3.3%, while precious metal miners plummeted 7.1%, mirroring the trend in precious metal prices amid rising yields. House prices increased in August, as the Nationwide Building Society reported, indicating sustained demand despite the uncertain economic landscape.

Energy stocks, on the other hand, rose, with BP up 3.9% and Shell increasing 1.6%, following higher crude prices. Reckitt Benckiser gained 4.4% after a U.S. jury ruled in its favor in a baby formula case, while Bodycote surged 4.1% following its acquisition by Veritas Capital for £1.85 billion. WPP experienced a 2.5% decline after reporting plans to cut up to 1,000 jobs by the end of the year due to the negative industry outlook.