FX.co ★ UK Gilt Yields Post Sharp Monthly Rise on Iran Crisis

The UK’s 10-year gilt yield was on track to end March at 4.85%, close to its highest level since July 2008, after climbing more than 60 basis points—one of the sharpest monthly increases among European sovereign bonds. The worsening conflict involving Iran has continued to push energy prices higher, triggering a marked reassessment of Bank of England policy expectations.

Market volatility was further amplified by a Wall Street Journal report indicating that US President Donald Trump might halt military operations against Iran even if the Strait of Hormuz remains closed. Investors swiftly unwound previous bets on two interest rate cuts and are now pricing in at least two hikes by 2026, assigning roughly a 50% probability to a move as early as April.

However, the BoE’s Alan Taylor urged restraint, stressing that the threshold for raising rates remains “high” and arguing that borrowing costs should be kept steady until the economic fallout from the conflict becomes clearer.