UK stocks drop to over one-month low as oil prices fuel inflation worries

Updates to markets close

Sept 9 (Reuters) - London's FTSE indexes fell in a broad-based selloff on Wednesday as signs of an escalating conflict in the Middle East sent oil prices to above $100 a barrel, spurring worries about energy-related inflation.

The blue-chip FTSE 100 index .FTSE slipped 1.31% to 10,670.06 points at close, its lowest since late July. The midcap FTSE 250 .FTMC fell 0.99% to its lowest since early August.

• Benchmark Brent crude oil futures LCOc1 rose past $100 a barrel, breaching the symbolic barrier for the first time since July 24 as U.S. and Iran both struck vessels, escalating the ongoing conflict. O/R

• Most sectors saw losses: heavyweight banks .FTNMX301010 were the biggest drag, with HSBC HSBA.L down 1.6%, Barclays BARC.L off 2% and Lloyds Banking LLOY.L sliding 2.2%.

• Healthcare major AstraZeneca AZN.L dipped 1.9%, defence firm Rolls-Royce RR.L shed 2.4% and consumer staples major Unilever ULVR.L eased 1.6%.

• "Brent crude pushing above $100 a barrel has had a psychological effect on the market, pushing a hypothetical inflation worry gauge to 'serious' status and dragging down financial assets," said Dan Coatsworth, head of markets at AJ Bell.

• Oil majors were a rare bright spot, with BP BP.L and Shell SHEL.L rising 1.3% and 0.1% respectively and the FTSE 350 energy index .FTNMX601010 hitting a more than four-month high before paring gains.

• Bond markets were also selling off, the yield on the 2-year gilt GB2YT=RR hitting its highest since November 2023.

• British assets are particularly susceptible to energy shocks given UK's status of a net oil importer.

• Investors are closely watching a key U.S. inflation report and economic growth data in the UK this week, that could influence interest rate expectations from central banks.

• Markets are pricing in a 60% chance the U.S. Federal Reserve will hike rates next week but widely expect the Bank of England to stand pat on rates, as per LSEG-compiled data.

• Burberry BRBY.L slipped 4% after HSBC downgraded the luxury goods maker to "hold" from "buy".

• Polymer maker Victrex VCTX.L gained 16.2% after raising its annual underlying profit before tax forecast.

• Eastern Mediterranean-focused gas producer Energean ENOG.L rose 9.3% after posting a 45% jump in first-half profit.

(Reporting by Anand Gopal and Purvi Agarwal in Bengaluru; Editing by Nivedita Bhattacharjee and Shailesh Kuber)

((AnandGopal.R@thomsonreuters.com))