UK 10-year gilt yields fell below 4.8%, their lowest level since mid-April, after US President Donald Trump indicated that a US–Iran agreement could be reached as early as this weekend, though Tehran has not confirmed this. Yields have been volatile, tracking moves in oil prices and developments related to the conflict, as traders assess the risk of a prolonged closure of the Strait of Hormuz. The longer any disruption persists, the greater the likelihood that sustained high energy prices will feed broader inflation, potentially forcing central banks to deliver more aggressive interest rate increases.
At the same time, UK GDP contracted by 0.1% in April, its first monthly decline since August, raising doubts about the scope for further Bank of England tightening. Investors are also watching the June 18 Makerfield by-election, where Labour’s Andy Burnham — seen as a potential successor to embattled Prime Minister Keir Starmer — could herald a shift toward looser fiscal policy.
