UK 10-year gilt yields slipped to 4.89%, pulling back from one-month highs and mirroring a decline in crude prices, as US–Iran peace talks continued despite recent hostilities in the Strait of Hormuz. Earlier in the week, Brent crude had climbed to a two-week peak after US President Trump declared the Iran ceasefire over, while still acknowledging Tehran’s ongoing interest in a deal. Given the UK’s heavier reliance on energy imports relative to many of its European peers, domestic markets remain especially sensitive to swings in oil prices.
Despite the day’s retreat, gilt yields ended the week 10 basis points higher, supported by growing expectations that the Bank of England will raise interest rates later this year. Money markets now fully price in at least one rate increase and assign roughly a 25% probability to a second. The repricing comes as the UK prepares for a change in political leadership, with Andy Burnham expected to be confirmed as Labour’s leader on Friday, July 17, and to formally assume the office of prime minister on Monday, July 20.
