London’s FTSE 100 index has been on a remarkable journey in 2025, culminating in a fresh record intraday high around 9,222 on Friday, August 15. This milestone was reached after four consecutive days of gains, underscoring a summer rally that’s been powered by upbeat blue-chip results, resilient UK economic data, and a global risk appetite that’s showing no signs of cooling off. Yet, the day ended with a twist—by market close, the index had slipped 0.4%, erasing those earlier gains and snapping its winning streak. Still, the FTSE 100 notched a modest 0.5% advance for the week, a testament to the underlying optimism that’s been building in the City.
What’s been driving this surge? According to Reuters, much of the week’s momentum came from the insurance sector. Admiral soared after posting a record first-half pre-tax profit of approximately £521 million—an eye-popping 69% increase—while Aviva reported a 22% jump in group operating profit and announced a higher dividend. These robust results not only buoyed their own share prices but also lifted sentiment across the broader insurance sector, which has faced its share of headwinds in recent years. As IG Markets noted, "Admiral's exceptional profit growth demonstrates how well-positioned insurers can capitalise on improving market conditions, while Aviva's dividend increase signals management confidence in sustained earnings momentum."
The financial sector as a whole, however, faced a setback on Friday. Shares of Standard Chartered plunged 7.2% after U.S. lawmaker Elise Stefanik called for a special attorney probe into the bank over alleged sanctions violations, as reported by Reuters. This call for investigation sent ripples through the market, dragging down a gauge of UK banks by 1.9%—the sharpest drop among major sectors that day. The FTSE midcap index wasn’t spared either, ending 0.2% lower for the session and 0.1% down for the week, with financials leading the decline.
Despite these hiccups, the banking sector has been a powerhouse for the FTSE 100 in 2025. According to CNBC, more than half of the index’s 15% return this year has come from banks, Rolls-Royce, and BAE Systems. Iain Barnes, chief investment officer at Netwealth, remarked, "The FTSE has had a cracking year so far, but it's interesting to see the drivers of returns. More than half of the index's 15% return in 2025 has come from the banks, Rolls Royce and BAE, so it hasn't been based on optimism around UK plc."
Broader economic tailwinds have also fueled the rally. Preliminary figures released this week showed that the UK economy grew 0.3% quarter-on-quarter in the second quarter—beating expectations and reinforcing the view that the Bank of England might soon have room to consider rate cuts as inflation cools. This so-called "Goldilocks" scenario—where growth is steady and inflation is moderating—has given equity investors plenty to cheer about. As IG Markets explained, this creates an environment "that's neither too hot nor too cold, allowing for supportive monetary policy without recession fears."
The FTSE 100’s performance in 2025 stands out on the global stage. Year-to-date, the index has climbed 12.4%, outpacing Wall Street’s S&P 500 (up just under 10%) and the Dow Jones Industrial Average (up 5.6%), and matching the Nasdaq Composite’s 12.4% gain, according to CNBC. While it lags behind Germany’s DAX (up 22.6%) and Spain’s IBEX 35 (surging almost 32%), the FTSE 100 has outperformed other major European indexes such as the Swiss SMI, Sweden’s OMX Stockholm 30, the French CAC 40, and the pan-European Stoxx 600.
One factor drawing investors to UK equities is valuation. Russ Mould, investment director at AJ Bell, told CNBC, "No-one seemed interested in the U.K. equity market at the start of the year, other than to bash it for failing to attract more new flotations and the defection of some companies to other exchanges, but what is unloved can also be undervalued. And valuation is the ultimate arbiter of investment return." The FTSE 100’s tilt toward traditional sectors—mining, energy, banks, and consumer staples—has raised questions about growth potential in recent years, but many of those sectors have outperformed in 2025.
Trade policy has also played a role. Earlier this year, the UK became the first country to sign a trade agreement with Washington following U.S. President Donald Trump’s unveiling of "reciprocal" tariffs. While Britain wasn’t spared entirely from new import duties, the deal softened the blow compared to other trading partners. Paul Surguy, managing director at Kingswood Group, told CNBC, "The U.K. is less exposed to U.S. tariff hikes than most countries, with exports of goods to the U.S. only making up 2% of GDP. And the recent limited trade deal generally sees US tariff increase to 10% – lower than for most other countries."
International investors are taking note. As AJ Bell’s Mould points out, the UK could benefit from the "Anywhere But the USA" trend, as investors seek to diversify away from U.S. dollar-denominated assets amid unpredictable American policy shifts. This move has helped London-listed equities attract fresh capital, especially given their attractive dividend yields and robust buyback programs. Share buybacks, such as Bytes Technology’s £25 million repurchase announced this week (which sent its shares up 7.9%), are seen as a sign of management confidence and a way to return value to shareholders.
Sector performance has been broad-based. The energy sector rose 0.8% on Friday, buoyed by speculation that a potential ceasefire in the Ukraine conflict could ease sanctions on Russian oil exports—possibly leading to lower global crude prices. Industrial metal miners climbed 1.4%, as weak economic data from China fueled hopes for fresh stimulus measures from Beijing. Meanwhile, the aerospace and defence sector, despite a 1.7% decline ahead of a high-stakes meeting between President Trump and Russian President Vladimir Putin in Alaska, has surged 71% year-to-date thanks to increased UK government defence spending.
Yet, risks remain. Technical analysts at IG Markets warn that the FTSE 100’s record high has been accompanied by negative divergence on the daily Relative Strength Index (RSI), signaling the potential for a short-term bearish reversal. A drop below key support levels could see the index revisit earlier lows, particularly if incoming manufacturing and services data or central bank signals disappoint.
Looking ahead, much will depend on whether the positive momentum can be sustained as the market enters the traditionally choppier autumn months. Investors are keeping a close eye on global economic indicators, central bank policy paths, and the durability of international capital flows into UK equities. For now, though, the FTSE 100’s rally stands as a testament to the power of resilient earnings, attractive valuations, and a global appetite for yield—even as the landscape remains as unpredictable as ever.
