FX.co ★ UK Gilt Yields Rebound as US-Iran Tensions Lift Oil Prices

UK 10-year gilt yields climbed to 4.85% at the start of June, rebounding from more than one-month lows reached at the end of May, as oil prices surged amid escalating tensions between the US and Iran. The two countries continued to trade strikes, with Iran claiming it had targeted a US airbase previously used in an attack on a telecommunications tower on Sirik Island, while both sides described their actions as "self-defense." Over the weekend, Washington and Tehran exchanged proposals to amend a draft agreement intended to extend the ceasefire and reopen the Strait of Hormuz, though the outlook for progress remained unclear. This geopolitical uncertainty has led investors to modestly raise their expectations for additional Bank of England rate hikes this year. On the domestic front, UK house prices fell 0.6% in May, according to Nationwide—worse than the expected 0.1% decline and the sharpest monthly drop since June 2025—amid weakening consumer confidence and the conflict’s impact on energy costs.