FX.co ★ UK 10-Year Gilt Yield Rebounds as Middle East Tensions Stoke Inflation Fears

The UK 10-year gilt yield climbed to 4.27%, rebounding from Friday’s more than one-year low of 4.229%, as escalating tensions in the Middle East rattled global markets. Investors have started to scale back expectations for interest rate cuts by major central banks amid renewed inflation concerns.

Over the weekend, the US and Israel carried out strikes on Iran, reportedly killing Iran’s Supreme Leader and effectively closing the Strait of Hormuz. In response, Iran launched missile and drone attacks across parts of the region, further amplifying geopolitical uncertainty.

The sharp rise in oil and gas prices has intensified fears of a resurgence in inflationary pressures across Europe. The region is especially exposed, with gas inventories at unusually low levels and significant replenishment needed before next winter, heightening the risk of persistent, energy-driven price pressures.