FX.co ★ UK Gilt Yields Fall Amid US-Iran Deal Uncertainty

UK 10-year gilt yields slipped to 4.85%, retracing part of Monday’s nine-basis-point surge, as falling oil prices and uncertainty over Middle East peace efforts prompted investors to adopt a cautious, wait-and-see stance. Diplomatic ambiguity added to the unease: US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu offered conflicting accounts of a phone call about the conflict in Lebanon, with Trump insisting he had urged both sides to halt hostilities, while Netanyahu’s account stopped short of confirming that message. The call came amid reports that Iran has paused negotiations with the US, demanding an end to the Lebanon clashes as a condition for any broader agreement, even as Trump maintained that talks with Tehran were progressing rapidly. On the monetary policy front, markets are now pricing in nearly two Bank of England rate hikes this year, with the first move fully expected in September, as policymakers contend with the twin challenge of rising inflation and a labour market that is gradually starting to soften.