FX.co ★ UK Gilt Yields Surge to 2008 Highs on Inflation Fears

UK 10-year gilt yields climbed to 5%, approaching levels last seen in 2008, as stalled US–Iran negotiations and the effective closure of the Strait of Hormuz intensified inflation fears and bolstered expectations of a more restrictive Bank of England policy stance. The geopolitical tensions have added pressure across markets, with Brent crude trading above $111 per barrel after US President Donald Trump rejected Iran’s proposal to postpone nuclear talks until the conflict and related shipping disputes are resolved. On the domestic front, Prime Minister Keir Starmer faces a pivotal vote on whether to open an investigation into his assurances that due process was followed in appointing Peter Mandelson as US ambassador. The heightened political scrutiny comes as the Bank of England heads into its Thursday meeting, where policymakers are widely expected to keep rates on hold amid the Middle East crisis. Even so, markets continue to price in at least two additional 25-basis-point rate increases in 2026.