* FTSE 100 down 0.4%, FTSE 250 down 0.4%

* ONS data shows UK's economy stalled in January

* HSBC ( HSBC ), Standard Chartered ( SCBFF ) hit by Middle East conflict

* Energy index rises as crude prices exceed $100 per

barrel

(Updates to market close)

By Tharuniyaa Lakshmi

March 13 (Reuters) - British stocks posted their second

straight week of losses on Friday, as the Middle East conflict

heightened fears about inflation andclouded the Bank of

England's monetary policy outlook.

The blue-chip FTSE 100 was down 0.4%, while the

mid-cap FTSE 250 fell 0.4%. Both indexes logged a second

week of losses, although the declines were less severe than last

week.

Markets braced for prolonged tensions as the U.S.-Israeli

war on Iran approached its third week, with Washington hardening

its stance and Tehran pledging to keep the Strait of Hormuz

shut.

Adding to the downbeat mood, data showed Britain's economy

stagnated unexpectedly in January after weak growth in the

preceding months, pointing to a loss of momentum even before the

war in Iran.

GDP showed zero growth in January. The median prediction in

a Reuters poll of economists was for a 0.2% month-on-month

increase.

"If the Strait of Hormuz re-opens by the end of March, the

economic fallout should be limited, but a prolonged closure and

persistently high energy prices pose the real risk," said

Jonathan Stubbs, analyst at Berenberg.

"Needing to avoid a depreciation in the pound that makes

inflation worse, the Bank of England would likely shelve

interest rate cuts for the rest of the year," Stubbs added.

Money markets have erased predictions of a March 19 rate cut

from the Bank of England, according to LSEG data.

Several big banks including BofA, Goldman Sachs ( GS ), Standard

Chartered ( SCBFF ) and Morgan Stanley ( MS ) have revised their forecasts to

predict a delay in easing by the BoE, now expecting the first

cut in the second quarter.

The heavily weighted UK energy index was up

1.1% with oil majors BP and Shell up 0.9% and

1.1% respectively, as Brent crude prices traded above

$100 a barrel.

HSBC ( HSBC ) and Standard Chartered ( SCBFF ) fell 1.2% and

3.2% respectively as both are heavily invested in the Gulf's

rise as a global finance hub, and have seen operations disrupted

as the Iran conflict rattles their Middle East ambitions.