The FTSE 100 has delivered one of its strongest performances in years over the 12 months to May 2026, gaining 22.41% and building on what was already the index’s best annual return in 16 years during 2025. The rally has been broad-based but uneven, with financials, basic materials and energy leading the charge while utilities and consumer staples have struggled. As the index approaches the mid-year mark, investors are weighing a complex backdrop of geopolitical risk, shifting interest rate expectations, and an AI-driven technology boom that is reshaping corporate earnings across the globe.
The FTSE 100 touched 10,466 on 12 June 2026, its highest intraday level in years, driven by a surge in banks, miners, and airline stocks following optimism over a potential resolution to the conflict in the Middle East. British Airways owner IAG led the index on that day, rising 6.7%, while copper miners Antofagasta and Anglo American gained over 5.5% on hopes that a deal to reopen the Strait of Hormuz would ease energy price pressures and support global growth.
The Sectors That Have Driven the Rally
Financials have been the single largest contributor to the FTSE 100’s gains over the past year, accounting for 26.5% of the index by weight. UK banks have benefited directly from the higher interest rate environment: as the Bank of England held its base rate at 3.75% through the first half of 2026, net interest margins remained elevated, boosting profits at Barclays, HSBC, Lloyds and NatWest. The sector’s outperformance reflects a broader truth about the FTSE 100 that distinguishes it from other major indices: it is heavily weighted towards old-economy sectors that benefit from inflation and higher rates rather than the growth stocks that dominate the S&P 500 and Nasdaq.
Basic materials have also been a standout. Mining companies benefited from strong demand and higher prices for copper and gold through the first half of the year. The AI infrastructure buildout, which is driving enormous demand for data centres and electrical systems globally, has kept copper prices elevated, while gold has attracted safe-haven flows amid persistent geopolitical uncertainty. The FTSE 100’s significant exposure to global miners, including Rio Tinto, BHP, Glencore, Anglo American and Antofagasta, has made it a beneficiary of these commodity trends in a way that more domestically focused indices are not.
Energy stocks performed strongly at the start of 2026 as oil prices spiked following the escalation of conflict in the Middle East and the blockade of the Strait of Hormuz. BP and Shell, which together represent a substantial portion of the index, saw sharp gains in the first quarter before giving back some of those gains as hopes of a peace deal emerged in June. By mid-June, Brent crude had fallen from highs above $95 a barrel to below $85, reflecting the market’s cautious optimism about a diplomatic resolution.
The Best and Worst Performers
Among individual stocks, the standout performers over the past 12 months have come from financial services and technology. Computacenter, the IT infrastructure group, has gained 75.67% over the year to May 2026, driven by strong demand for enterprise technology services as businesses invest in AI-related infrastructure. IG Group Holdings, the spread-betting and CFD platform, has risen 67.89%, benefiting from elevated market volatility that drives trading volumes. Aberdeen Investments has gained 53.96%, reflecting a recovery in asset management sentiment as equity markets have risen.
In May 2026 specifically, the best performers included Softcat, which jumped 26.88% after strong earnings, and JD Sports Fashion, which leapt 25.20%. The technology sector was the top performer for the month, mirroring the global pattern of AI-driven earnings upgrades lifting tech-adjacent companies.
The worst performers over the same period have been concentrated in utilities and energy exploration. Autotrader has fallen 43.53% over the past year, weighed down by weakness in the used car market and concerns about the transition to electric vehicles. Centrica dropped 12.71% in May alone, while SSE fell 11.74%, as investors rotated away from defensive, yield-oriented stocks in favour of higher-growth alternatives. Ithaca Energy, despite gaining 71.95% over the full year, fell 18.28% in May as oil prices softened.
The March Selloff and the Recovery
The year has not been without turbulence. The FTSE 100, along with global markets, experienced a sharp selloff in March 2026 following the escalation of conflict in the Middle East. The sudden spike in energy prices raised fears of a return to the inflation dynamics of 2022 and 2023, and investors reduced risk exposure sharply. The FTSE 100’s recovery from that selloff has been driven by a combination of resilient corporate earnings, the Bank of England’s measured response to the inflation uptick, and growing market optimism that a diplomatic resolution to the conflict remains achievable.
The UK economy contracted by 0.1% in April 2026, a figure that Barclays economists noted was unlikely to alter the Bank of England’s policy outlook materially, given the temporary nature of the disruption. UK annual inflation fell to 2.8% in April from 3.3% in March, partly due to the long-planned cap on household energy bills, providing some relief to both consumers and rate-setters.
The FTSE 100 vs Global Peers
The FTSE 100’s 22.41% gain over the year to May 2026 compares favourably with many global peers, though the US market has continued to outperform on the back of AI-driven technology earnings. The S&P 500 rose 5.3% in May alone, driven by technology sector strength, while the MSCI World Index gained 4.5% for the month. The FTSE 100’s more modest 0.7% gain in May reflects its lower exposure to the AI technology theme, though its year-on-year performance demonstrates that the index’s value-oriented composition has served investors well in an environment of higher rates and commodity price strength.
The FTSE 250, which is more domestically focused, posted a 4.6% return in May, outperforming the FTSE 100 for the month as domestically oriented financials, industrials and consumer discretionary stocks recovered. This divergence between the two indices reflects the ongoing tension between global macro themes, which favour the FTSE 100’s international earners, and domestic UK recovery, which benefits the mid-cap index.
The Outlook for the Second Half
The trajectory of the FTSE 100 in the second half of 2026 will be shaped by three key variables. First, the resolution or continuation of the Middle East conflict: a deal that reopens the Strait of Hormuz would bring oil prices lower, ease inflation, and allow central banks to resume cutting rates, which would benefit rate-sensitive sectors including housebuilders and consumer discretionary stocks. Second, the pace of AI-driven capital expenditure globally: continued strong spending on data centres and AI infrastructure supports miners, industrials and technology services companies. Third, the Bank of England’s rate path: any further cuts from the current 3.75% base rate would support the domestic economy and boost the FTSE 250 in particular.
Hargreaves Lansdown’s analysis, published on 25 June 2026, notes that the FTSE 100’s momentum has continued into 2026 following its record annual gain in 2025, and that the financials sector has been the dominant driver of returns. For investors with exposure to the index, the first half of 2026 has demonstrated the enduring appeal of a market that, while often overlooked in favour of US technology, offers genuine diversification through its commodity, financial and international earnings exposure.
