FX.co ★ UK Gilt Yields Rise as US-Iran Tensions Take New Turn

The UK 10-year gilt yield rose back to 4.752% on Monday as escalating tensions between the US and Iran rattled financial markets. Oil and gas prices spiked after the US Navy seized an Iranian vessel and Tehran retaliated by firing on ships and once again closing the Strait of Hormuz, dashing recent hopes for a reopening. Brent and WTI crude futures climbed about 6%, reversing much of Friday’s losses. In response, traders have added roughly six basis points to expectations for Bank of England rate increases this year, though markets still fully price in only a single hike. Political uncertainty is also pressuring gilts amid mounting controversy over Prime Minister Keir Starmer’s nomination of Peter Mandelson as US ambassador. Starmer is due to address parliament on the matter, and further scrutiny is anticipated as officials involved in the vetting process prepare to give evidence.