FX.co ★ UK Gilt Yields Drop Amid Middle East De-escalation Hopes

The UK’s 10-year gilt yield slipped to 4.8%, pulling back from Monday’s near 18-year high, as hopes grew for a potential de-escalation in the Middle East. Reports indicate that Washington proposed a 15-point peace plan to Tehran following a possible one-month ceasefire; however, Iran denied any role in the talks, stating that “no one can trust US diplomacy.”

In the UK, February inflation data showed headline consumer prices holding steady at 3%, in line with expectations, while core CPI edged up to 3.2%, slightly above the 3.1% consensus. Because the figures predate the recent conflict, they had little impact on market sentiment. With oil prices easing, investors are now pricing in fewer than two interest rate hikes by year-end, implying about 68 basis points of tightening by December, down from nearly 75 basis points expected earlier in the week. The adjustment suggests waning concern that elevated energy prices will fuel further inflation.