Best FTSE 100 stocks to watch in 2026

FTSE 100 in brief

The FTSE 100 breached the psychologically significant 10,000 point threshold for the first time on the opening trading day of 2026, capping an extraordinary 2025, during which the index delivered a total return of 22% — its strongest annual performance since 2009 during the aftermath of the global financial crisis.

For the first time in years, London's blue-chip index outperformed Wall Street, with the S&P 500 posting a comparatively modest 17% gain over the same period. This reversal of fortunes marks a significant shift in global equity market dynamics and has reignited interest in UK equities among international investors.

Several structural factors have underpinned the FTSE 100's stellar performance. Mining companies, precious metals producers, defence stocks and banking shares have been the primary drivers of the rally.

Gold prices surged by 64% in 2025, its strongest annual performance since 1979, creating highly favourable conditions for the miners that make up a substantial portion of the index. Defence stocks including Rolls-Royce, BAE Systems and Babcock delivered exceptional returns, propelled by increased European defence spending in response to geopolitical tensions.

The currency backdrop has also played a crucial role in the FTSE 100's success. With approximately 75% of FTSE 100 corporate income derived from overseas ( a fact that distinguishes the index from more domestically focused benchmarks), the weakness of the US dollar throughout 2025 provided a significant tailwind.

The commodity super-cycle has further supported the index. Copper prices reached record highs in early 2026, benefiting miners like Glencore, Rio Tinto and Antofagasta. The combination of strong commodity prices, robust defence spending and resilient banking sector earnings has created a perfect storm of positive factors for the FTSE 100's constituents.

From a valuation perspective, the UK market continues to trade at a significant discount to US equities. The FTSE 100 trades at a price-to-earnings ratio of approximately 14, compared to the S&P 500's 25, making UK equities increasingly attractive to value-focused investors seeking diversification away from expensive US technology stocks.

This valuation gap, combined with attractive dividend yields, with many FTSE 100 companies offering yields above 4%, has drawn capital back into British equities after years of underperformance.

The Bank of England's monetary policy stance has also provided support. With UK inflation showing signs of resuming its downward trend, policymakers have gained flexibility to continue cutting interest rates at a measured pace. This gradual easing of financial conditions offers a constructive backdrop for equities, particularly interest-rate-sensitive sectors such as housebuilders, utilities and banks.

It's worth noting that the FTSE 100 has very low exposure to technology stocks - just 3.5% compared to approximately one third of the S&P 500, making it a popular partner to US indices for investors seeking diversified exposure. While this has historically been viewed as a disadvantage during periods of technology stock outperformance, it proved to be an asset in 2025 as investors rotated into value stocks, commodities and defensive sectors.

FTSE 100 companies are typically well-established businesses with strong brand recognition, large economies of scale and proven business models. They also tend to be reliable dividend payers, with many maintaining or increasing their dividends even during challenging economic conditions. This income-generating characteristic remains a key attraction for pension funds, insurance companies and income-seeking retail investors.

Top FTSE 100 stocks to watch

These are the 10 largest companies on the FTSE 100 by market capitalisation at the start of 2026.

We also offer many FTSE 100 ETFs, including the popular iShares Core FTSE 100 UCITS ETF, which seeks to track the index with minimal expense fees.

AstraZeneca (LON: AZN)

AstraZeneca has cemented its position as the UK's most valuable company, with a market capitalisation of approximately £230 billion at the start of 2026. The global pharmaceutical giant specialises in the development of novel treatments across oncology, cardiovascular, renal and respiratory diseases. Its strong pipeline of new drugs and consistent revenue growth make the company an attractive investment for those seeking exposure to the healthcare sector.

The company's momentum has been remarkable, with significant revenue growth driven by advances in oncology and CVRM (cardiovascular, renal and metabolism).

AstraZeneca's success reflects the broader transformation of the UK economy towards knowledge-intensive, innovation-driven sectors and its position at the top of the FTSE 100 represents a significant shift from the index's traditional dominance by banks and commodity companies.

HSBC (LON: HSBA)

HSBC remains Europe's biggest bank by assets under management and holds the second highest position in the FTSE. The international banking titan offers a wide range of financial services,

including retail banking, wealth management and global banking. Its extensive global network and diversified revenue streams make it popular with defensive investors.

The bank delivered robust performance in 2025, with profit before tax increasing due to increased interest income and enjoying a healthy CET1 capital ratio of 15.2%, demonstrating strong capital strength. The bank's large footprint in Asia, particularly Hong Kong and mainland China, provides significant growth opportunities as the region continues its economic expansion.

HSBC's dividend yield and share buyback programmes also make it attractive to income-focused investors seeking exposure to global financial services.

Shell (LON: SHEL)

Shell is one of the world's leading energy companies and the larger of the two oil majors on the FTSE 100. The company engages in the exploration, production, refining and marketing of oil and natural gas, while also investing in renewable energy solutions. Its diversified energy portfolio and consistent share buybacks ensure the stock remains firmly in the top tier.

Shell has demonstrated impressive financial discipline, dealing several consecutive quarters of share buybacks.

As energy transition continues to dominate the sector's narrative, Shell's investments in low-carbon energy alongside its traditional hydrocarbon business position it to benefit from both near-term fossil fuel demand and longer-term renewable energy growth.

Unilever (LON: ULVR)

Unilever is a multinational consumer goods powerhouse with a diverse portfolio of well-known brands in food, beverages, cleaning agents and personal care products - including Dove, Magnum, Ben & Jerry's and Persil. Its strong brand recognition, global reach and focus on sustainability make it a popular portfolio component among UK investors.

The company has been progressing with its strategic transformation, including plans to sell its premium ice cream business to unlock further shareholder value and streamline operations.

Unilever's defensive characteristics (consumers continue purchasing household essentials even during economic downturns) combined with its emerging market exposure provide a balanced growth profile for investors.

Rolls-Royce (LON: RR)

Rolls-Royce has emerged as one of the FTSE 100's biggest success stories, entering the top 10 for the first time. The aerospace and defence company designs, manufactures and services power systems for aviation, marine and land applications, with a particular focus on civil aerospace engines.

The company's transformation under CEO Tufan Erginbilgic has been extraordinary. Rolls-Royce shares surged across 2024 and 2025, driven by the recovery in civil aviation following the pandemic, improved operational efficiency and growing defence demand.

The company benefits from long-term aftermarket service contracts that provide recurring revenue streams as its engines accumulate flying hours.

With increased European defence spending and the continued recovery of international air travel, Rolls-Royce appears to be well-positioned for sustained growth. The company's technological leadership in jet engine manufacturing and its expanding presence in sustainable aviation fuels provide additional long-term growth drivers.

British American Tobacco (LON: BATS)

British American Tobacco is a world leader in tobacco and, increasingly, new categories of non-traditional nicotine-based products such as vapes. The company controls brands including Dunhill, Kent and Lucky Strike, though it faces headwinds in key markets where legislation and changing consumer preferences are reducing cigarette sales.

Despite challenges in traditional tobacco, BAT's strategic pivot towards smokeless products is gaining traction.

The company's high dividend yield, which is typically among the highest in the FTSE 100, makes it attractive to income investors, though regulatory risks remain a key consideration for those investing in the stock.

Rio Tinto (LON: RIO)

Rio Tinto is a leading global mining group, focused on the extraction and processing of metals including iron ore, aluminium and copper. Its strong balance sheet and exposure to electrification megatrends make Rio a key FTSE 100 stock for many investors seeking commodity exposure.

Growing global demand for copper, which is essential for electric vehicles, renewable energy infrastructure and grid expansion, positions Rio Tinto favourably for the ongoing energy transition. However, the company continues to navigate ESG concerns and community relations challenges in various jurisdictions.

GSK (LON: GSK)

GSK (GlaxoSmithKline) has established itself as a top-10 FTSE 100 constituent following its separation from consumer healthcare business Haleon. The pharmaceutical and vaccines giant reported strong 2025 results, with total sales rising 7%, driven by double-digit growth in specialty medicines.

GSK achieved five major FDA product approvals in 2025 and has continued to strengthen its pipeline through strategic acquisitions and partnerships in respiratory, immunology and oncology. The company raised its full-year 2025 dividend and has executed £1.4 billion of its £2 billion share buyback programme announced in 2024.

New CEO Luke Miels, who took over from Emma Walmsley at the start of 2026, has reaffirmed the company's growth outlook, expecting continued turnover growth. The company's strong positions in respiratory medicines, HIV treatments and vaccines provide a diversified revenue base with multiple growth drivers.

BP (LON: BP)

BP is the second FTSE 100 oil major. Like Shell, the business is involved in the exploration, production and marketing of oil and natural gas, alongside significant investments in renewable energy and electric vehicle charging infrastructure.

The company is known for continued dividends and share buybacks, demonstrating its commitment to returning capital to shareholders even as it invests in energy transition initiatives.

BP recently appointed Meg O'Neill as its new chief executive, replacing Murray Auchincloss.

O'Neill's appointment brings fresh leadership as the company navigates the complex balance between maintaining profitable hydrocarbon operations and investing in lower-carbon energy sources.

BP's dividend history and energy transition strategy make it attractive to investors seeking both income and exposure to the changing energy landscape.

Barclays (LON: BARC)

Barclays rounds out the top 10, with a diversified financial services business operating retail banking, credit cards, corporate and investment banking globally, with particular strength in the UK and US markets.

Barclays has benefited from higher interest rates, which have supported net interest margins in its retail and commercial banking operations. The company's investment banking division has also seen strong performance, driven by increased corporate activity and trading revenues.

As one of the UK's Big Four retail banks, Barclays plays a crucial role in the British economy, providing lending to businesses and consumers. The company's balanced business model of combining stable retail banking with more cyclical investment banking operations provides investors with diversified exposure to financial services.

FTSE 100 stocks summed up

• The FTSE 100 broke through 10,000 points for the first time in January 2026
• FTSE 100 companies are well-established with strong brand recognition, economies of scale and proven business models
• The index is dominated by dividend-paying miners, oil companies, banks, defence stocks and pharmaceutical companies
• AstraZeneca has become the UK's most valuable company by market cap, reflecting the shift towards knowledge-intensive sectors