FX.co ★ UK Gilt Yield Falls as Oil Slump Eases Inflation Fears

UK 10-year gilt yields slipped below 4.9%, their lowest level since July 10, as a sharp drop in oil prices helped ease inflation worries. Crude prices have fallen roughly 10% this week amid rising optimism that the US and Iran could reach an agreement to end their five-month conflict and reopen the Strait of Hormuz. US President Donald Trump said the two countries were engaged in “very good discussions,” bolstering hopes for a deal that would restore Middle Eastern energy supplies. The decline in oil prices has reduced concerns about a resurgence in inflation and the drag of higher prices on economic growth, strengthening expectations that the Bank of England will tighten policy only gradually. Last week’s Bank of England meeting reinforced this outlook, with Governor Andrew Bailey playing down the need for further rate increases and confirming that the disinflation process remains on track.