Stock prices in London closed lower on Thursday, as rising oil prices and concerns over inflation fueled investor caution. The FTSE 100 index, which tracks the largest companies listed on the London Stock Exchange, fell 0.6% to 10,608.92, while the FTSE 250, which focuses on mid-sized companies, dropped 0.9% to 23,885.94. European markets also declined, with the CAC 40 in Paris down 0.5% and the DAX 40 in Frankfurt down 0.7%. These declines came as oil prices climbed above $105 a barrel, driven by escalating tensions between the U.S. and Iran, which raised fears of disruptions to global energy supplies and further inflation. The European Central Bank (ECB) raised interest rates by 25 basis points as expected, bringing its key rates to 2.50%, 2.65%, and 2.90% for the deposit, main refinancing, and marginal lending facilities, respectively. The move was seen as a response to ongoing inflationary pressures, including rising producer prices in the U.S. and the ongoing conflict between the U.S. and Iran. ECB President Christine Lagarde described the rate increase as a “no-brainer,” emphasizing that policymakers did not discuss future rate decisions. The ECB’s inflation forecasts for the coming years were slightly revised upward, with headline inflation expected to average 3.0% in 2026, compared to 2.5% in 2027 and 2.1% in 2028. Meanwhile, global bond yields rose as investors adjusted their expectations for future interest rates in response to inflation concerns. The yield on the U.S. 10-year Treasury note climbed to 4.92%, while the 30-year yield reached 5.34%. In the U.S., producer price inflation accelerated to 5.4% year-on-year in August, surpassing market expectations and adding to worries about rising prices. In London, Associated British Foods saw its shares fall sharply, as weak sales at its Primark clothing chain overshadowed plans for home delivery. Industrial metal prices, particularly copper, also dropped, dragging down mining companies like Antofagasta and Anglo American. On the FTSE 250, THG, the parent company of Lookfantastic and Cult Beauty, fell 13% as new European Union parcel duties and the summer heatwave affected its sales. However, some smaller companies saw gains, with Empyrean Energy and Eleco rising sharply after major developments. The pound weakened slightly against the dollar and the euro, while gold prices fell. Looking ahead, Friday’s economic calendar includes UK GDP data and other key indicators, with expectations of a flat month-on-month growth in July.