With a quarter-point rise to 4% widely expected on Thursday, London's Blue-Chip index spent Tuesday's session behaving as though the decision had already arrived.

For more than two years, British borrowers and investors have not had to think about the Bank of England raising rates. That is set to change on Thursday 5 November 2026, when the Monetary Policy Committee (MPC) announces its latest decision. A 25 basis point increase, lifting Bank Rate from 3.75% to 4%, is widely expected. If it happens, it will be the first hike since August 2023, and it would mark a clear turn in the policy cycle.

The FTSE 100 did not wait for the announcement to react. On Tuesday 3 November the index closed at 10,638.43, down 122.90 points, or 1.14%, from Monday's finish of 10,761.33. Reuters described it as the blue-chip benchmark's steepest one-day fall in a month, and the decline brought a run of four consecutive winning sessions to an end. Several forces were at work, from a slump in metals to company-specific disappointments, but the looming rate decision was a common thread running through the day's commentary.

Why a single hike matters so much

A 25 basis point move may sound modest. What gives this one its weight is the direction of travel. A first increase after a long pause tends to reset expectations for what comes next, and markets are already pricing well beyond Thursday. According to LSEG data cited by Reuters, money markets had fully priced four quarter-point hikes by next September.

That sits uneasily with some forecasters. ING expects a follow-up increase in February, but regards market pricing for further moves beyond that as excessive. The bank's economists also argued that the worsening energy crisis had "made it much harder for the Bank not to act." In other words, the case for a hike is tied closely to energy and inflation, rather than to any sudden strength in the domestic economy.

Amundi Investment Institute's head of global macroeconomics, Alessia Berardi, offered a similar note of caution. She observed that the market was pricing a full hiking cycle, while suggesting that "one or two moves will be enough." The gap between what traders expect and what some economists think is necessary is one reason the MPC's accompanying message, and the vote split behind it, may matter as much as the headline decision.

To understand why the Bank is under pressure, it helps to look at oil. Brent Crude settled on Monday 2 November at $104.77 a barrel, even after a fall of $8.66, or 7.63%, that day. WTI settled at $96.46. Reuters reported that crude slid roughly another 2% on Tuesday in volatile trade, as investors weighed talks aimed at ending the wars in Ukraine and Iran.

Those are still elevated levels, and Reuters noted that high oil prices have fuelled Inflation fears, with many central banks already raising rates. The conflict involving Iran, which began in late February 2026, has disrupted a vital shipping corridor: before the fighting, roughly one-fifth of the world's Crude Oil and Natural Gas shipments passed through the Strait of Hormuz.

Where the pressure showed up on Tuesday

The banking sector was one of the clearest places where rate anticipation was visible. The FTSE 350 banks index fell 1.6% ahead of the Bank of England decision. HSBC (LSE:HSBA) dropped 2.0% and was the biggest approximate drag on the FTSE 100 in points terms.

At first glance, falling bank shares ahead of a rate rise can seem counterintuitive, because higher rates can widen the Margin lenders earn between what they charge borrowers and what they pay savers. In practice, the picture is more nuanced. Rising rates can also squeeze borrowers, slow lending Demand and raise the risk of bad debts. When markets start pricing an extended cycle rather than a single move, investors often weigh those second-order effects more heavily. Positioning ahead of a major event can also lead to profit-taking regardless of the likely long-term impact.

Elsewhere, the selling was broad. The FTSE 350 basic resources index fell 2.6% as copper slid to a multiweek low, with Antofagasta (LSE:ANTO) down 3.5% and Glencore (LSE:GLEN) down 2.8%. Associated British Foods (LSE:ABF) fell 2.2% after forecasting lower annual profit, and Coca-Cola Europacific Partners (LSE:CCEP) slipped 2.1% after flagging cost pressures. The mid-cap FTSE 250 held up better, closing down 0.5% at 24,674.91.

Intraday figures suggest the mood darkened as the day went on. The index was around 10,705 early in the morning, according to Reuters via MarketScreener, and around 10,687.72 at midday, according to Share Talk, before closing well below both levels.

How rate rises ripple through a global index

The FTSE 100 is often described as an international index rather than a pure barometer of the UK economy, because many of its members earn much of their Revenue overseas. That means a Bank of England hike does not hit every constituent in the same way.

Domestically focused companies, such as housebuilders and retailers, tend to be more sensitive to borrowing costs, because higher Mortgage and Loan rates can affect household spending and property demand. Lenders sit in a complicated position, as described above. Companies with large overseas Earnings may feel the effect mainly through currency: if higher UK rates support sterling, the pound value of profits earned in dollars or euros can shrink when translated back. Sterling was trading around $1.3417 on Monday 2 November, and about 83.53p per euro.

There is also a valuation effect that applies across the board. When interest rates rise, the return available on cash and bonds improves, and investors may demand more from equities in compensation. That can weigh on share prices even where company earnings are unaffected.

Key dates to watch

Wednesday 4 November:Eurozone inflation figures (expected 3.9%), plus results from Marks & Spencer and Prudential, among others.

Thursday 5 November:Bank of England MPC decision, with a 25bp rise to 4% widely expected.

Friday 6 November:US October jobs report and IAG third-quarter results.

Thursday 12 November:ONS first quarterly GDP estimate for July to September 2026, at 7:00am.

The bottom line

Thursday's expected hike would end a long stretch without rate increases in the UK, and Tuesday's 1.14% fall in the FTSE 100 suggested investors were already adjusting. The bigger question may be how far the cycle runs. Markets are priced for four rises by next September, while voices at ING and Amundi suggest fewer may prove sufficient. How the MPC frames its outlook, and whether energy prices continue to ease or flare up again, could shape the index's path well beyond this week.