* FTSE 100 index gains 0.4 percent
* High oil prices help energy stocks
* United Utilities, Severn Trent trade ex-div
By Tricia Wright
LONDON, June 18 (Reuters) - Britain’s top equity index advanced on Wednesday, with strong crude oil prices following heavy fighting in Iraq underpinning energy shares.
Oil firms such as Royal Dutch Shell and BG Group rose 1.9 percent and 1.2 percent respectively, helping the UK oil and gas index gain 1.4 percent, the top sectoral performer in the FTSE 100 by some margin.
“The market is very closely watching the escalating violence in Iraq, a major oil producer. In the short term, higher oil prices may benefit some oil companies, but in the longer term, if it continues, it will result in an oil shock,” said Henk Potts, equity strategist at Barclays.
“Clearly that would be an overall negative for the economy as higher oil prices have the potential to hurt global growth and raise input cost of companies.”
Brent crude traded above $113 per barrel as fighting in Iraq shut the country’s biggest refinery and led to the withdrawal of staff by foreign oil firms, stoking worries about exports from the key oil producer.
The blue-chip FTSE 100 index was up 27.59 points, or 0.4 percent, at 6,794.36 points by 1040 GMT. The index is up only 0.7 percent so far this year, but trades just 2.3 percent below its record high in late 1999.
However, investors avoided strong bets ahead of the Federal Reserve’s two-day policy meeting. The U.S. central bank is widely expected to cut another $10 billion from its monthly bond purchases, while investors will be watching for any comments on when the Fed would begin to raise interest rates and its outlook for the economy.
Data released on Tuesday showed a surprisingly high reading for U.S. inflation, which sparked speculation of a hawkish tilt to the Fed’s policy outlook.
Gains were also capped by a 3.4 percent and 2.4 percent fall respectively in shares of United Utilities and Severn Trent as the two companies traded without the attraction of their latest dividend payouts. (Additional reporting by Atul Prakash, editing by Louise Heavens)