FTSE 100 on correction course as Iran war boosts rate hike bets

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* FTSE 100 down 2.4%, FTSE 250 down 3.2%

* FTSE 100 down about 11% since Middle East conflict began

* Miners lead declines as gold hits four-month low

* Spire Healthcare falls after buyout talks collapse

March 23 (Reuters) - The main UK indexes slumped on Monday and were on track to confirm a correction, as investors priced in the Bank of England hiking interest rates sharply with the Middle East conflict driving up energy costs.

The blue-chip FTSE 100 dropped 2.4% to its lowest level in three months at 1103 GMT. The index is now down about 11% since the war erupted earlier this month, on course to confirm that it has been in correction since hitting a record high in late February.

The mid-cap FTSE 250 tumbled 3.2% to its lowest level since May 2025.

Britain's 10-year government bond yields rose to their highest since July 2008 at 5.068% as markets priced in four BoE interest rate rises for this year, a sharp reversal from expectations of two rates in 2026.

British Prime Minister Keir Starmer is set to chair an emergency meeting on the economic fallout from the war in Iran on Monday, with finance minister Rachel Reeves and Bank of England Governor Andrew Bailey in attendance, the government said.

Stocks across the globe sold off after Iran warned it would target Israeli power plants and facilities supporting U.S. bases in the Gulf if U.S. President Donald Trump follows through on his threat to "obliterate" Iran's power network.

All sectors traded in red, with precious metal miners being the biggest drag, after gold sank more than 5% to a four-month low as the Middle East tensions entered its fourth week.

Among other stocks, BT fell 6.1% after Britain said it would regulate BT Openreach's national broadband network for another five years with a price cap on a wider range of speeds, to drive competition and extend fibre connections to the final fifth of the country's premises.

Spire Healthcare fell 19.3% to its lowest since December 2020 after buyout talks with Bridgepoint and Triton end, and both parties said they have no intention to make an offer for the private hospital group. (Reporting by Tharuniyaa Lakshmi in Bengaluru; Editing by Janane Venkatraman)