UK 100 Index – Facing a Potential Shift in SentimentUK 100 IndexPEPPERSTONE:UK100PepperstoneDuring early March the UK 100 outperformed other European indices, in that it didn’t fall as much, when confronted with the challenge of the escalating Iran conflict. While general risk off sentiment saw selling of the UK’s primary index, its weighting towards multi-national corporates rather than simply UK affiliated businesses, alongside exposure to key commodity, energy and defense sectors helped to slow the drop off which udermined others such as the Germany 40, an index packed with industrial corporates heavily exposed to soaring energy prices. However, last week saw a significant shift in sentiment as traders began to face up to the reality that the Iran conflict may last longer than hoped or initially anticipated. This raised inflation expectations and led to a spike in UK bond yields on the basis that the Bank of England may be forced to flip from cutting interest rates to support a sluggish economy, and pivot to hiking interest rates quickly to stop inflation from spiking due to higher cost of oil and natural gas. These concerns reached a peak yesterday morning when major concerns about an imminent escalation of the Iran war were rippling through financial markets. At one point, UK bond yields reached their highest level since 2008, as investors priced in as many as 4 25bp (0.25%) hikes from the Bank of England in 2026, a massive shift from expecting 2 25bp (0.25%) cuts through 2026 before the Iran conflict started. This led traders to fret about the sustainability of UK government finances and the negative impact on growth in the economy, which ultimately saw the UK 100 fall to 4 month lows of 9669, before recovering some of its lost ground to trade at 9886 at the time of writing (0630 GMT). The rebound being supported by US President Trump’s decision to postpone bombing of Iran’s energy grid. Looking forward, while UK 100 prices may continue to be driven by updates on whether a de-escalation of the Iran conflict is a real possibility, tomorrow’s UK CPI reading, released at 0700 GMT could also prove to be relevant. A higher-than-expected release could weigh on UK assets, while a tamer reading could help to calm frayed nerves. UK 100 Index Technical Update: Gauging Potential Support Within Increasing Volatility Sell-Off Since the outbreak of hostilities between the US and Iran, the UK 100 index has come under increasing selling pressure, falling as much as 11.5% from its highs in late February, as concerns over the impact of a prolonged conflict and rising energy prices weigh on global economic expectations. As the weekly chart below shows, this down move has produced a more extended retracement of the April 2025 to February 2026 advance. Now, after Monday’s brief relief rally, traders may be asking where next for the UK 100? In this regard, it could be useful to identify what could be the relevant support and resistance levels that could help determine the next directional themes. Potential Support Levels: The Fibonacci retracements from the April 2025 low (7525) to the 10,932 all‑time high can help highlight potential support areas to monitor through the remainder of this week. The 38.2% retracement at 9637 could mark the first key support zone and is possibly where traders are now focused. As the chart above highlights, closing breaks below 9637 could expose further downside risks toward the 9425 level, which is the November 2025 low. If that also gives way, weakness may extend toward 9233, which is the 50% retracement. Potential Resistance Levels: While the initial support at 9637 holds any further price weakness, attention may shift to identifying resistance levels that could cap any rebound or lead to further price strength if they give way on a closing basis. In this regard, traders may be watching a resistance band at 9970/10061, which is a combination of the 38.2% and 50% Fibonacci retracements of the March 18th to 23rd decline. As the daily chart above shows, if closing breaks above 9970/10061 were seen, it could signal renewed attempts at price strength, opening the way for a move toward 10152, the 61.8% retracement. Sustained closes above 10152 could open potential for further gains toward 10452, which is the March 18th high. The material provided here has not been prepared accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. 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