UK's FTSE 100 up over 1% as commodity stocks rally; BoE rate path, Mideast tensions in focus

By Tharuniyaa Lakshmi and Shashwat Chauhan

July 22 (Reuters) - London's FTSE 100 rose over 1% in broad-based gains on Wednesday with commodity-linked stocks among top gainers as oil and metal prices climbed, though focus was on the Bank of England's rate hike trajectory and simmering Middle East tensions.

The blue-chip FTSE 100 index closed 1.2% higher at 10,717 points, briefly hitting its highest in over four months. The midcap FTSE 250 climbed 0.7%, clocking its highest closing level in over four years.

• Precious metal miners jumped 4.5% to lead sector gains, as gold prices advanced to a two-week high. Industrial metal miners also gained 1.9%.

• Heavyweight energy gained 1.4%, tracking a more than 3% jump in oil prices on mounting concerns that escalating U.S.-Iran hostilities and threats by Yemen's Iran-backed Houthi militia will disrupt key supply routes.

• British banks added 1.7%, with HSBC — the UK's most valuable company — climbing 2.1%.

• British inflation cooled more than expected last month as a U.S.-Iran de-escalation reduced fuel prices, but the relief is likely temporary for new Prime Minister Andy Burnham, who seeks to ease living costs.

• "The Monetary Policy Committee (MPC) will note that today’s headline drop compares with the Bank’s own 3.1% forecast for June. This is seen as a welcome relief from the uncertainty surrounding the extent to which rising energy prices might penetrate higher prices and wages," said Jeremy Batstone-Carr, European Strategist, Raymond James Wealth Management.

• The Bank of England is scheduled to meet next week with money market traders widely expecting the central bank to hold its lending rate steady. Traders currently see at least one 25-bps rate hike by December and a 72% chance of another increase.

• Among stocks, Segro rose 2.9% after U.S. firm Prologis submitted a final takeover proposal for the warehouse landlord.

• J D Wetherspoon fell 4.2% after the British pub chain warned that annual earnings would likely miss expectations due to weaker sales and rising costs.

• Shares of low-cost airline easyJet dropped 11.8% after Reuters reported the European Union is preparing a review of airline ownership rules, a move that could complicate U.S. bids for the company.

(Reporting by Tharuniyaa Lakshmi and Shashwat Chauhan in Bengaluru; Editing by Joyjeet Das and Jonathan Ananda)