The FTSE 100 index closed down 39.44 points, or 0.4%, at 10,658.13 on Tuesday. Earlier in the day, it had fallen as low as 10,586.39. The FTSE 250 index also declined, losing 15.74 points, or 0.1%, to 23,818.74, while the AIM all-share index dropped 1.89 points, or 0.2%, to 783.15. Across Europe, the CAC 40 in Paris fell 0.3%, and the DAX 40 in Frankfurt dropped 0.2%. In the United States, the Dow Jones Industrial Average was down 0.9% at the time of the closing bell in London, with the S&P 500 and Nasdaq Composite also falling by 0.5% and 0.7%, respectively. Susannah Streeter, a chief investment strategist at Wealth Club, noted that financial markets continue to face volatility due to high energy prices and concerns about inflation and interest rates. Oil prices remained elevated as tensions between the U.S. and Iran persisted, raising fears of prolonged higher energy costs. Brent crude oil was quoted at $108.48 a barrel on Tuesday, slightly up from the previous day. Streeter said the conflict has "become more entrenched," leading to concerns that higher energy costs could become a long-term issue, forcing companies to increase prices on a wide range of goods. Higher inflation fears have led to increased bond yields as investors anticipate more interest rate hikes. The yield on the U.S. 10-year Treasury rose to 5.01%, a 19-year high, while the 30-year yield reached 5.37%. In the UK, the yield on 10-year gilts hit 5.41%, also a 19-year high. These increases come ahead of key interest rate decisions in the U.S. on Wednesday and the UK on Thursday. Morgan Stanley adjusted its expectations for the Federal Reserve, now predicting a quarter-point rate increase in September and another in December, compared to its earlier stance of no hikes this year. The bank cited slower-than-expected progress in reducing inflation as a reason for its revised outlook. Meanwhile, analyst Kallum Pickering from Peel Hunt expects the Bank of England to hold rates this week and into the rest of the year, with potential cuts in 2025 as inflation risks ease. This view contrasts with market expectations of several rate hikes by early 2027. In the UK, the labor market showed signs of cooling despite a stable headline unemployment rate of 4.9% in the three months to July. More recent payroll data indicated a decline in employment, with payrolled employee numbers falling in July compared to the previous year and month. However, wage growth slowed slightly, which could be reassuring for the Bank of England. Analysts noted that wage pressures remain "benign," offering some comfort to policymakers. The British pound edged up slightly to $1.3485 against the dollar and €1.1681 against the euro. The dollar also rose against the yen, trading at 155.12 yen. On the FTSE 100, defense stocks like Babcock International and BAE Systems rose sharply amid ongoing tensions in the Middle East, while oil giant Shell also gained. However, software stocks like Relx and London Stock Exchange declined. On the FTSE 250, Wickes rose as it reported improved performance, while Trustpilot fell due to accounting issues and discrepancies in sales tax reporting. Analysts remained cautiously optimistic about Trustpilot’s future despite the setbacks. Gold prices fell slightly on Tuesday, closing at $4,285.70 per ounce. The biggest gainers on the FTSE 100 included BAE Systems, Babcock International, Shell, Kingfisher, and BP, while the largest decliners were London Stock Exchange Group, IG Group Holdings, Relx, Glencore, and Antofagasta. The upcoming week will see full-year results from Barratt Redrow and Moonpig, along with UK inflation data, U.S. retail sales figures, and the U.S. interest rate decision.