The yield on the UK 10-year gilt eased to around 4.95% as renewed optimism over a potential agreement to reopen the Strait of Hormuz drove oil prices lower, tempering inflation concerns. Crude prices retreated after Pakistan indicated that the US and Iran were “close to some sort of arrangement” aimed at de-escalating tensions and restoring shipping through the key maritime corridor. That assessment contrasted with President Donald Trump’s recent hardening of his position toward Tehran, including demands for reparations over deaths linked to Iran and to domestic unrest.
At the same time, the Bank of England kept interest rates on hold at its July meeting. Governor Andrew Bailey said the disinflation trend remained broadly intact despite external risks. Recent data from the BRC showed UK retail sales rising 1.3% year-on-year in July, below the 12-month average and pointing to subdued consumer demand. By contrast, Barclays data indicated that household spending increased by 2%, marking its strongest pace of growth so far this year.
