FX.co ★ UK Gilt Yields Ease as Iran War Hopes Temper Rate Hike Fears

The UK’s 10-year gilt yield declined toward 4.75%, pulling back from multi-year highs, as hopes grew for a swift resolution to the Iran conflict. This eased fears over a renewed surge in energy costs and the prospect of more aggressive interest rate increases by the Bank of England. Cautious optimism was reinforced by US President Donald Trump’s remark that the US could withdraw from Iran "in two or three weeks," with or without a deal, though Washington’s inconsistent messaging is keeping uncertainty elevated as the war enters its fifth week. Market expectations for BoE tightening have shifted markedly: investors are now pricing in fewer than two rate hikes in 2026, compared with four anticipated in mid-March, while earlier projections for two rate cuts before the conflict have been fully priced out.