* FTSE 100 down 1.4%, FTSE 250 falls 1%

* UK borrowing in February exceeds expectations

* Smiths Group ( SMGKF ) slides after missing revenue forecasts

(Updates to market close)

By Tharuniyaa Lakshmi

March 20 (Reuters) - London's main indexes closed lower

on Friday and logged their third consecutive weekly decline, as

the escalating Middle East war and surging oil prices deepened

inflation fears and cemented expectations for the Bank of

England to hike interest rates.

The blue-chip FTSE 100 closed down 1.4%, while the

mid-cap FTSE 250 was down 1%. Both indexes also fell for

a third straight session.

Oil prices rose more than 1% on the day as the

three-week-old Iran war showed no signs of abating, with the

U.S. preparing to send thousands of additional troops to the

Middle East in coming weeks.

British energy stocks slipped 1.7%, but were

still around record-high levels.

Aerospace and defence stocks and banking

shares weighed the most on London's benchmark,

falling 2.5% and 2%, respectively.

The BoE held rates at 3.75% at Thursday's policy meeting.

Its warning that inflation posed a bigger risk than slowing

growth pushed traders to price in a roughly 70% chance of a

25-basis-point hike by April and up to three quarter-point

increases by year-end.

Barclays, J.P. Morgan and Morgan Stanley now see a higher

chance of BoE hikes as early as April.

Fresh fiscal concerns emerged after Britain borrowed far

more than expected in February, partly due to volatile

debt-interest payments, just as the Iran conflict drove up

funding costs and fuelled calls for higher public spending.

"Rachel Reeves must feel like she's been squeezed between a

rock and a hard place as the current geopolitical instability

rams home the need to spend more on defence but also leaves

ordinary workers at risk of another inflation burn," said Danni

Hewson, head of financial analysis at AJ Bell.

Among other movers, Smiths Group ( SMGKF ) plunged 9.8%, in

its steepest single-day fall since 2021, after the engineering

group missed half-year organic revenue forecasts.

JD Wetherspoon fell 10.6% after the pub chain said

that its full-year profits may fall below market estimates after

higher energy costs and wage-related taxes dragged first-half

profit down by 37%.