2 FTSE 100 shares that could surprise investors if interest rates fall
Almost every FTSE 100 stock reacts to interest rate changes. With another cut expected from the Bank of England (and the US Federal Reserve) later this month, two shares in particular could see a surprising boost.
Energy in focus
One sector Iâm watching closely is energy. Right now, most investors are extremely bearish, but with inflation still high, I want exposure to hard assets.
BP (LSE: BP.) has been a standout, up 32% since April â impressive given oil prices have stubbornly lingered around $60.
Since its strategy reset in February, the company has launched six major oil and gas projects and made two new discoveries, including its largest in 25 years in the Bumerangue block off Brazil.
Its downstream business, which had been a drag, also bounced back. Underlying earnings in the first nine months of 2025 were 40% higher than the same period in 2024.
The oil major may have a sky-high price-to-earnings of 251 and a wafer-thin dividend cover of 0.08 but thatâs mostly down to the fact that 2024 reported earnings were hit by large impairments, including in its ill-fated renewables portfolio.
Underneath the bonnet, the company is generating huge free cash flow of over $12bn (BP reports in US dollars), covering the dividend well over two times.
Beyond its dividend, the oil major returns excess cash through a steady share buyback programme. In Q2 alone, it repurchased $750m of shares and plans to match that with another tranche by year-end.
Gold stocks
The second sector Iâm watching if interest rates fall is gold mining.
Gold has surged 60% over the past year, its best performance in more than 50 years. Foreign central banks are turning away from US Treasuries amid spiralling debt, while the weak dollar is pushing investors toward assets that protect purchasing power.
At the top of the pack is Fresnillo (LSE: FRES), the FTSE 100âs best performer this year, up 338%. With an all-in sustaining cost under $2,000, the company is a cash cow, and its interim dividend has jumped 225%, rewarding shareholders handsomely.
Risks
Investing in commodity-related stocks carry significant risks beyond just the obvious falling prices.
For BP, regulatory changes, environmental fines, or costly operational mishaps on new projects could hit profits. Large impairments from past investments, such as in renewables, also weigh on reported earnings and can create volatility in dividend coverage.
For Fresnillo, rising gold and silver prices bring risks too. Governments could revoke mining concessions or tighten regulations â as China has done with rare earths. With silver making up a big part of its output, a slowdown in industrial demand during a recession could hit revenues hard.
Bottom line
But if interest rates fall, BP and Fresnillo could be FTSE 100 stars.
BP is generating massive cash, thanks to strong energy demand and disciplined spending. That cash covers dividends and funds buybacks, positioning the company well if borrowing costs drop.
Fresnillo offers a mix of growth and safety. Gold and silver protect against inflation, and lower rates could lift metals prices and the companyâs profits.
Both companies share a key trait: they produce real cash in a world of high inflation and government deficits. That resilience is why theyâre in my portfolio â delivering steady income and inflation protection, even as economic conditions shift.
The post 2 FTSE 100 shares that could surprise investors if interest rates fall appeared first on The Motley Fool UK.
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Andrew Mackie has positions in Bp P.l.c. and Fresnillo Plc. The Motley Fool UK has recommended Fresnillo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
