FX.co ★ UK 10-Year Gilt Yield Tops 5%

The yield on the UK 10-year gilt climbed above 5% as a sharp rise in oil prices reignited concerns about inflation and the future path of monetary policy. Brent crude advanced beyond $89 per barrel amid escalating tensions between the US and Iran and growing uncertainty over the prospects for a Middle East agreement. President Donald Trump has set out tougher conditions for Tehran, while Iran continues to seek reparations as part of negotiations to end the conflict. Higher energy costs are a particular worry for the UK, a net oil importer that has been grappling with stubbornly high inflation, reinforcing expectations that the Bank of England may have to keep interest rates elevated for longer. Markets are now more than fully pricing in a rate increase by December and another by the spring. Elsewhere, UK retail sales rose 1.3% year-on-year in July, below their 12-month average, while Barclays data showed consumer spending up 2%, its strongest pace so far this year.