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The yield on the UK’s 10-year gilt rose by seven basis points to 4.72% on Thursday, partially reversing a 19-basis-point decline recorded the previous day. The move followed a sharp rise in oil prices, driven by growing uncertainty over the fragile two-week ceasefire between the US and Iran and renewed fears of energy-led inflation.
Geopolitical tensions intensified after Israel launched its most destructive airstrikes on Lebanon to date, causing hundreds of casualties and triggering threats of retaliation from Iran. Tehran ruled out any further peace negotiations with Washington, while the ongoing blockade of the Strait of Hormuz continued to strain the already tenuous truce.
Adding to the pressure, US President Donald Trump said American forces would remain deployed near Iran until a “real agreement” is reached. In this environment, traders have renewed expectations of monetary tightening, with markets now pricing in at least one Bank of England interest rate increase by the end of 2026.
