UK 10-year gilt yields inched up to 4.97% on Tuesday, mirroring a rebound in oil prices following Monday’s sharp selloff, as ongoing uncertainty around the US–Iran conflict underpinned demand for risk-sensitive assets. Market sentiment improved after US President Donald Trump called off planned strikes on Iran, indicating that a diplomatic path remained open, even as Tehran denied that any talks were underway or being considered.
On the domestic front, last week’s Bank of England meeting reinforced expectations that policymakers are in no hurry to tighten monetary policy, prompting investors to pare back forecasts for interest rate increases in 2026. The BoE voted 6–3 to keep rates on hold, with three members backing a hike—more than markets had anticipated. Nonetheless, Governor Andrew Bailey emphasized that the disinflation trend remains intact, while some policymakers hinted that rate cuts could come back into focus if tensions in the Middle East continue to ease.
