FX.co ★ UK Bonds Under Pressure as Trump’s Iran Stance Sparks Sell-Off

The UK’s 10-year gilt yield rose back to 4.8%, moving closer to its highest level since July 2008, after US President Donald Trump’s pledge of more forceful strikes on Iran dashed hopes of de-escalation. Although Trump said the US operation was nearly complete, his vow to ramp up actions over the next two to three weeks—including possible attacks on power infrastructure—intensified investor anxiety. In the absence of any new justification for the conflict and amid growing uncertainty, inflation concerns have prompted markets to reassess expectations for Bank of England policy. Investors now anticipate two interest rate hikes in 2026, reversing four consecutive days of pared-back bets that had seen projections fall below two hikes as of yesterday. Even so, this remains short of last week’s peak, when markets briefly priced in four increases. The repricing comes despite Bank of England Governor Andrew Bailey’s recent warning that markets were overestimating the likelihood of further tightening.