The FTSE 100 just recorded its best quarterly streak since 2022 — what’s driving it?

The FTSE 100 closed Q2 2026 on a high — literally. Tuesday’s session confirmed the index’s sixth consecutive quarterly gain, with a 3% rise in Q2 following a 2.5% climb in Q1. That’s the FTSE’s best run of back-to-back quarterly gains since 2022 (Trading Economics, 1 July 2026).

The streak didn’t happen in a vacuum. Defence contracts, banking resilience, commodity exposure and the index’s internationally diversified revenue base have all played a role. Here’s the breakdown — and what could test the run in Q3.

Which sectors drove the FTSE 100’s Q2 gains?

Three sectors did the heavy lifting in Q2:

• Aerospace and defence: Rolls-Royce and BAE Systems have been standout performers, rising 2.1% and 2% respectively on the final day of Q2 alone (Trading Economics, 1 July 2026). Heightened geopolitical tensions — particularly the US-Iran conflict — have increased government defence spending commitments across NATO members, driving sustained order books and earnings upgrades for UK defence names
• Banking: Lloyds Banking Group, HSBC, Barclays, and NatWest have all contributed positively. With the Bank of England holding rates at 3.75% and the rate cutting cycle moving slowly, net interest margins for UK banks have remained supportive of earnings — a different picture from the aggressive rate-cut environment many had expected at the start of the year
• Mining and base metals: Rio Tinto and Glencore have benefited from improved base metal prices, driven by Chinese stimulus hopes and supply constraints. The FTSE 100’s significant mining weighting — one of its structural differentiators from domestic UK-focused indices — provided a meaningful tailwind through Q2

Why has the FTSE 100 outperformed expectations?

At the start of 2026, consensus forecasts had the FTSE 100 delivering modest gains at best. The six-quarter streak reflects several structural factors that analysts underweighted:

• International revenue base: approximately 75–80% of FTSE 100 revenue is generated outside the UK. This means the index has been relatively insulated from domestic UK headwinds — weak consumer confidence, energy bill pressures, and political uncertainty — that have weighed on the more domestically exposed FTSE 250
• Valuation discount: the FTSE 100 entered 2026 trading at a significant discount to US and European peers on a price-to-earnings basis, attracting value-oriented institutional investors looking for alternatives to stretched US equity valuations
• Currency effect: a modestly weaker pound has boosted the sterling value of overseas earnings for FTSE 100 companies, providing an additional tailwind to reported profits

The FTSE 100’s six-quarter winning streak is its longest since 2022 — and follows years of underperformance relative to US and European indices. The index is up approximately 19.3% year-to-date as of 29 June 2026. (Trading Economics, June 2026)

How has Q3 opened?

The index traded flat to lower on Wednesday 2 July, providing an early reminder that the streak faces fresh tests. Two pressures weighed on the open:

• Gold price decline: Fresnillo fell 2.1% and Endeavour dropped 0.8% as gold prices retreated, pressuring the index’s precious metal mining stocks. Gold has fallen roughly 25% from its January 2026 record high of $5,589/oz amid a stronger US dollar and easing Middle East tensions (Trading Economics, 2 July 2026)
• US-Iran doubts: fresh uncertainty over the durability of the US-Iran ceasefire resurfaced on Wednesday, weighing on broader risk sentiment. Associated British Foods fell roughly 2.5% after warning its sugar division suffered further deterioration from Middle East conflict disruption, even as Primark spin-off plans progressed (Trading Economics, 2 July 2026)

Defence stocks continued to provide an upside buffer: BAE Systems rose 0.8%, Babcock surged over 2%, and Rolls-Royce climbed over 1% (Trading Economics, 2 July 2026). AstraZeneca and GSK were also marginally positive.

For more on how sector composition shapes the FTSE 100’s behaviour, see IG’s guide to what is the FTSE 100.

What are the risks to watch in Q3?

The six-quarter streak faces several potential headwinds as the second half opens:

• US-Iran ceasefire durability: a breakdown in peace talks would push oil prices higher, benefit energy stocks but hurt consumer-facing names and broader sentiment
• Bank of England policy: Nationwide reported UK house prices flat in June, missing growth expectations, with the annualised housing rate rising just 2.2% (Trading Economics, 2 July 2026). A slower-than-expected housing recovery limits bank earnings upside
• Gold and commodity prices: a continued pullback in gold would continue to drag on the index’s mining stocks, which have been a core pillar of the 2026 run
• US Nonfarm Payrolls (3 July): US jobs data due Thursday will influence Fed rate expectations and, by extension, global equity sentiment and the dollar — both key inputs for the FTSE 100’s internationally exposed constituents

FTSE 100 streak summed up

• Six consecutive quarterly gains through Q2 2026 — the index’s best run since 2022
• Q2 rose 3%; Q1 rose 2.5%; the index is up approximately 19.3% year-to-date as of 29 June 2026
• Defence (Rolls-Royce, BAE Systems, Babcock), banking (Lloyds, HSBC, Barclays, NatWest) and mining (Rio Tinto, Glencore) were the key drivers
• Q3 opened softly: gold price falls and US-Iran doubts weighed on 2 July, though defence names provided support
• Key risks: US-Iran ceasefire durability, Bank of England rate path, gold price direction, US jobs data
• Past performance is not a reliable indicator of future results. Capital at risk.

Frequently asked questions

Capital at risk. The value of investments can go down as well as up, and you may get back less than you invest. Past performance is not a guarantee of future results.

Past performance is not a reliable indicator of future results.