FX.co ★ UK Gilt Yields Fall as Oil Slides Below $100

UK 10-year gilt yields reversed early gains to end Tuesday at 5.20%, their lowest level since September 8, extending an eight-basis-point decline from the previous session as oil prices continued to retreat. Brent crude slipped below $100 a barrel after reports that Iran could reopen the Strait of Hormuz if the US lifted its blockade on Iranian ports.

On the fiscal side, official data showed the UK budget deficit widened to £18.3 billion in August, exceeding economists’ forecasts of £15.5 billion. The larger shortfall was partly driven by inflation, which has pushed up spending on state pensions and social benefits.

Market focus is now shifting to next month’s Autumn Budget. The government is reportedly weighing changes to its fiscal rules that would allow borrowing for infrastructure and other construction projects to be excluded from headline calculations. A similar approach was previously proposed during Keir Starmer’s time in office.