Energy shares were supported by a rise in oil prices amid speculation about possible new sanctions on Iran after U.S. President Donald Trump said "nothing is off the table" in response to Tehran's test launch of a missile.

The UK oil and gas index <.FTNMX0530> rose 1.3 percent, boosted by increases of 1.2-3.0 percent in shares of Royal Dutch Shell , Tullow Oil (>> Tullow Oil plc) and BP (>> BP plc).

However, investors stayed cautious as experts said a reversal of U.S. transparency requirements for the industry could give American oil firms an edge over European rivals, which face some of the toughest rules in the world.

Financials were in demand. UK banks <.FTNMX8350> rose 1.6 percent, with analysts citing renewed positivity around the sector following last year's broader "reflation trade", which picked pace after the election of U.S. president Donald Trump.

"Generally investor sentiment around the banks, especially with Donald Trump coming in, is starting to improve," Jonathan Roy, investment manager at Charles Hanover Investments, said, adding the fact UK bank stocks had eased over the course of the week had brought them down to more attractive levels.

Barclays (>> Barclays PLC) and Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) rose 3.4 percent and 2.7 percent respectively.

Financials also got support as Trump prepared to scale back the Dodd-Frank Wall Street reform law, which was enacted in the wake of the 2007-09 financial crisis.

"Since Dodd Frank was introduced, banks have devoted a lot more capital towards compliance and have had to decrease leverage, both of which are a direct hit to profitability," Jasper Lawler, senior analyst at London Capital Group, said.

"If Dodd Frank is watered down, that’s a direct boost to the bottom line for banks. Barclays and RBS are top of the FTSE."

The blue-chip FTSE 100 <.FTSE> closed 0.7 percent higher at 7,188.30 points, the biggest one-day percentage rise so far this year. The index hit an intra-day peak of 7,202.37 points, the highest since Jan. 25.

The index, dominated by internationally-exposed firms, was also helped by a weaker sterling, which tumbled on Thursday after the Bank of England appeared to be in no rush to tighten monetary policy. Sterling fell further on Friday.

The broader stock market extended gains after better-than-expected U.S. jobs data masked underlying weakness in wage growth that may keep the Fed from raising rates next week.

Among smaller British firms, mid-cap Beazley (>> Beazley PLC) closed 6.4 percent higher after hitting a record high as the insurer's profit beat expectations. Fellow blue-chip insurers Prudential (>> Prudential plc) and Admiral (>> Admiral Group plc) rose 3.1 percent and 2.3 percent respectively.

However, miners hindered the broader market rally.

The UK mining index <.FTNMX1770> fell 3.2 percent as metals prices retreated, with copper on the backfoot after China spooked metals markets by raising interest rates. Glencore (>> Glencore PLC), Rio Tinto (>> Rio Tinto plc), and Antofagasta (>> Antofagasta plc) fell by 3.3-4.8 percent.

(Reporting by Kit Rees; Editing by Mark Potter)

By Kit Rees and Atul Prakash