UK's FTSE 100 rises on energy, banks boost as investors await BoE decision

March 17 (Reuters) - The UK's FTSE 100 inched higher on Tuesday on the back of gains in energy and heavyweight financials even as the conflict in the Middle East raged on, while investors awaited the Bank of England's interest rate decision this week.

The blue-chip FTSE 100 .FTSE rose 0.6% by 1042 GMT, while the mid-cap FTSE 250 .FTMC rose 0.1%.

Iran expanded its strikes on the UAE as the U.S.-Israel war with Tehran entered its third week, disrupting Gulf oil flows through the Strait of Hormuz. U.S. allies also refused President Donald Trump's request to help reopen the crucial waterway, sending oil prices 4% higher. O/R

The energy sector .FTNMX601010 rose 1.1%, trading at a record high. Majors BP BP.L and Shell SHEL.L advanced over 1% each, clawing back some ground lost on Monday.

Heavyweight banks .FTNMX301010 gained 0.6%, while utilities .FTUB6510 followed with a 1.4% rise.

British borrowing costs dipped for a second day but remained well above levels seen before the Iran war, with markets now pricing roughly 50% odds of a Bank of England hike in November.

Investors' focus this week will be on interest rate decisions in the UK, the U.S., and Europe and comments from policymakers on how they intend to navigate the potential energy-driven inflationary pressures.

Most economists polled by Reuters abandoned their rate cut calls for March, now expecting a 25-basis-point cut in April or June. J.P. Morgan, however, expects the BoE to keep rates unchanged through 2026, with the next cut only in the first quarter of 2027.

Among individual stocks, Close Brothers CBRO.L fell 10.4% to the bottom of the mid-cap index after the lender said it will cut 600 roles by fiscal 2027.

Trustpilot TRST.L jumped 23% after the global online review platform said it had quadrupled its annual profit.