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* FTSE 100 down 0.4%, FTSE 250 down 0.3%

* Iranian attack on tankers escalates Middle East

tensions

* RICS survey shows UK housing market slowdown

* Investors ramp up BoE rate hike bets again

* HSBC ( HSBC ) closed all Qatar branches amid Middle East war

By Tharuniyaa Lakshmi

March 12 (Reuters) - Britain's main indexes extended

losses on Thursday as a surge in oil prices heightened inflation

worries amid the ongoing Middle East conflict and led traders to

scale back expectations of Bank of England rate cuts.

The blue-chip FTSE 100 was down 0.4% by 1057 GMT,

while the mid-cap FTSE 250 fell 0.3%.

Crude prices climbed back to $100 a barrel earlier in the

session after Iranian boats appeared to have attacked two fuel

tankers in Iraqi waters, as the conflict between Iran and

U.S.-Israeli forces looked far from resolved.

Oil prices were last rising more than 6% and

are up more than 32% since the start of March.

Britain is seen as more exposed than many other Western

countries to an energy price shock due to its stretched public

finances and its heavy reliance on imported gas.

"The longer the disruption goes on, the greater the impact

on energy prices and in turn global inflation. This then has

implications for interest rates too," said Danni Hewson, head of

financial analysis at AJ Bell.

Money markets returned to betting on a BoE rate hike,

pricing in a roughly 54% chance of a quarter-point rise in

borrowing costs in December, compared with expectations of no

change on Wednesday.

Most other FTSE 350 sub-sectors were in the red, but defence

, mining, and utilities

bucked the trend.

A survey from RICS showed Britain's housing market has lost

steam as demand faded from buyers concerned about the

implications of the Middle East conflict and possible increases

in mortgage rates on the back of energy price rises.

Among other movers, HSBC ( HSBC ) fell 5.8% after the bank

closed all branches in Qatar until further notice amid the

Middle East conflict.

TP ICAP rose 7.3% to the top of the mid-cap index

after the inter-dealer broker posted a 3.6% rise in annual

pre-tax profit.