UK benchmarks set for weekly loss as Mideast war hits rate-cut hopes

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* FTSE 100 down 0.3%, FTSE 250 down 0.7%

* ONS data shows UK's economy stalled in January

* HSBC (HSBC) and Standard Chartered (SCBFF) hit by Middle East conflict

* Energy index rises as oil prices exceed $100 per barrel

By Tharuniyaa Lakshmi

March 13 (Reuters) - London's main stock indexes extended declines on Friday, as the Middle East conflict heightened inflation fears that clouded the Bank of England's monetary policy outlook, while energy firms gained on higher oil prices.

The blue-chip FTSE 100 was down 0.3% by 1058 GMT, while the mid-cap FTSE 250 fell 0.7%. Both indexes were on track for a second weekly loss. They tracked movements in global markets, which slid as the U.S.-Israel war on Iran neared two weeks and showed no signs of de-escalation.

Markets are bracing for a drawn-out conflict, with U.S. President Donald Trump escalating rhetoric against Iran, and Tehran pledging to keep the Strait of Hormuz shut.

UK heavyweight energy index was up 1.3% with oil majors BP and Shell up 1.5% and 1.3%, respectively, as crude prices traded above $100 a barrel.

Most other sub-indexes were in the red, with miners down 2.1%, making them the day's worst performers. Meanwhile, ONS data showed Britain's economy stalled in January, with flat GDP, weak services and rising energy-price risks from the Iran conflict, deepening investor worries.

"If the Strait of Hormuz re-opens by the end of March, the economic fallout should be limited, but a prolonged closure and persistently high energy prices pose the real risk," said Jonathan Stubbs, analyst at Berenberg.

Money markets have erased hopes of a March rate cut from the Bank of England, according to LSEG data. BofA has pushed its expected first BoE rate cut to June due to energy-driven inflation risks, joining Goldman Sachs (GS), Standard Chartered (SCBFF) and Morgan Stanley (MS) in delaying easing forecasts amid the Iran-linked surge in oil prices.

"Needing to avoid a depreciation in the pound that makes inflation worse, the Bank of England would likely shelve interest rate cuts for the rest of the year," said Stubbs. Among individual stocks, HSBC (HSBC) and Standard Chartered (SCBFF) fell 1% each as both are heavily invested in the Gulf's rise as a global finance hub, and have seen operations disrupted as the Iran conflict rattles their Middle East ambitions. (Reporting by Tharuniyaa Lakshmi in Bengaluru; Editing by Harikrishnan Nair)