The following is a guest editorial courtesy of Carolane de Palmas, Markets Analyst at Retail FX and CFDs broker ActivTrades.

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The FTSE 100 closed at 10,686 points on Wednesday 19 February 2026, marking its second consecutive record high and cementing a remarkable run for the UK’s flagship blue-chip index. The milestone follows a standout 2025 in which the index gained 21.51%, broke above the psychologically significant 10,000-point barrier for the first time in its history, and even outpaced the US S&P 500 in local currency terms. So what is powering this rally, and can it continue through the rest of 2026?

A Historic Run for the FTSE 100

Until recently, the FTSE 100 had something of an image problem. Seen by many global investors as a sleepy collection of banks, oil giants, and miners, it had long traded at a deep discount to its US counterparts. That perception is now being forcefully challenged. After years of relative underperformance, the index has strung together back-to-back record highs and is already tracking well ahead of many of its global peers in 2026.

On Wednesday, London-listed miners led the charge. Antofagasta surged 10.5% and Anglo American rose 4.6% as copper prices bounced back from a more than one-week low. Glencore added 4.4% following a full-year earnings update that, while slightly lower than the prior year, came accompanied by a $2 billion shareholder payout. AstraZeneca, meanwhile, has climbed almost 15% since the start of 2026, illustrating the breadth of the rally beyond just commodities.

Five Key Drivers Behind the FTSE 100’s Rise

1. The Absence of AI Volatility Is a Feature, Not a Bug

One of the most counterintuitive reasons for the FTSE 100’s strength is what it does not have: a heavy concentration in artificial intelligence stocks. While the Nasdaq and S&P 500 have been buffeted by dramatic swings in AI-linked names — Nvidia shares are flat year-to-date in 2026 — the FTSE 100’s old-economy DNA has acted as a stabiliser.

Banks, mining companies, defence contractors, and healthcare businesses now look attractive precisely because they are not caught up in the AI hype cycle. Global investors who have grown nervous about the eye-watering capital expenditure requirements of the US tech giants are increasingly viewing London-listed equities as a sensible diversification play. The FTSE’s diverse range of industries is offering investors a genuine alternative to the volatility they have experienced elsewhere.

That said, this dynamic cuts both ways. If confidence in AI-driven earnings returns and US tech stocks resume their long-term upward trend, some of the capital currently rotating into the UK could reverse course. Investors will be watching AI earnings delivery closely throughout 2026.

2. Global Revenue Exposure and the Commodities Supercycle

The FTSE 100 is the key index of the London Stock Exchange and is often described as a British index, but in practice it is a global one. Around 80% of revenues generated by its constituent companies come from overseas operations, which means the index tends to act as a barometer of worldwide economic conditions rather than just the UK’s domestic economy.

This international profile has been a major tailwind in early 2026. Talk of a new commodities supercycle has pushed prices for copper, gold, silver, and oil higher earlier this year, directly benefiting the large mining and energy companies that make up a significant share of the index. London is home to some of the world’s largest extractive multinationals, and when commodity prices rise, the FTSE 100 tends to follow.

3. Defence Stocks Surge on Rising Geopolitical Tensions

Geopolitical uncertainty has been another powerful catalyst for the FTSE 100 index. UK Prime Minister Keir Starmer has made increasing defence spending a central government commitment, pledging to raise military expenditure to 2.5% of GDP in the near term, with an ambition to reach 3% in the next parliamentary cycle. That commitment has translated directly into strong gains for defence companies listed in London, many of which have seen their share prices surge as contract pipelines expand and earnings forecasts are revised upward.

The broader European context matters too. NATO allies across the continent are under renewed pressure to spend more on defence, creating a multi-year structural tailwind for the sector that extends well beyond the UK.

4. Falling Inflation and the Path to Lower Interest Rates

Financial services stocks — banks, insurers, and asset managers — have benefited from the higher interest rate environment of recent years. But the direction of monetary policy is now changing, and that shift could broaden the rally significantly.

UK inflation fell to 3.0% in January, its lowest reading in nearly a year. The Bank of England held rates at 3.75% at its February meeting, but Governor Andrew Bailey’s tone was notably more optimistic than in previous months. He signalled he expects a sharp drop in inflation in the coming months, which should bring CPI back to the Bank’s 2% target.

Markets responded quickly. Sterling dipped against the dollar as traders priced in approximately an 85% probability of a rate cut in March. Lower interest rates historically create a more supportive environment for equities broadly — they reduce the cost of corporate borrowing, stimulate consumer spending, ease mortgage burdens, and tend to make dividend-paying stocks more attractive relative to cash and bonds. A more accommodative rate environment could provide a particularly meaningful boost to UK housebuilders and other domestic-facing sectors that have been under pressure in recent years.

5. Attractive Valuations Backed by Strong Earnings

Perhaps the most compelling structural argument for the FTSE 100 is its valuation. UK equities have for years traded at a significant discount to their US equivalents — with price-to-earnings multiples roughly half those seen on Wall Street. That gap is beginning to attract serious attention from international investors who see long-term value in London-listed names.

And, the recent price gains are not purely a function of sentiment. The companies driving the rally have also been delivering strong operating results and earnings momentum. Miners are benefiting from higher commodity prices translating into real cash flows. Pharmaceutical companies like AstraZeneca are reporting robust revenue growth. Defence companies are booking record order backlogs. The market re-rating is being supported by fundamentals, which makes it more durable than a purely momentum-driven move.

Can the FTSE 100 Reach 11,000 Points in 2026?

Market analysts are broadly optimistic on the FTSE 100’s prospects for the remainder of 2026, with many flagging 11,000 points as the next key target. The index has multiple tailwinds at its back: a potential rate-cutting cycle, continued commodity price support, a defence spending boom, cheap valuations, and strong underlying earnings.

However, the path to 11,000 is unlikely to be straightforward. Several risks could derail or delay further gains. Currency volatility is one: sterling’s performance against the dollar will depend heavily on the Bank of England’s pace of easing relative to the Federal Reserve, and US President Donald Trump’s pressure on the Fed to cut rates more aggressively adds an unpredictable international dimension. A stronger pound would reduce the sterling value of the FTSE’s large overseas earnings streams.

The AI narrative is another variable. If US tech giants’ enormous investments in artificial intelligence begin to generate the kind of tangible earnings growth their valuations imply, risk appetite could swing back sharply toward US growth stocks and away from the UK’s more defensive, value-oriented profile. Global macroeconomic conditions — particularly the trajectory of growth in China, which is a key demand driver for many FTSE-listed miners — will also shape the index’s direction.

Sources: Morningstar, Reuters, The Wall Street Journal, This Is Money, Office for National Statistics

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