FX.co ★ UK Gilt Yields Jump on Inflation Fears

UK 10-year gilt yields rose back above 4.9%, rebounding from more than one-month lows, as renewed US-Iran tensions drove oil prices higher and heightened inflation worries. On Monday, Iran’s Tasnim News Agency reported that Tehran would suspend negotiations with the US over Israeli strikes on Lebanon and move to fully close the Strait of Hormuz, accusing Washington of “violating the ceasefire on all fronts.” Over the weekend, both sides had exchanged proposals to amend a draft agreement aimed at extending the ceasefire and reopening the Strait of Hormuz, but progress remained uncertain. This geopolitical backdrop led investors to slightly increase their expectations for additional Bank of England rate hikes this year, with markets now pricing in two further increases. On the domestic front, UK house prices fell 0.6% in May, according to Nationwide—sharply exceeding the expected 0.1% decline and marking the largest monthly drop since June 2025—amid weakening consumer confidence and the impact of the Iran conflict on energy costs.