UK government borrowing costs fall to lowest since mid-April as markets cling to US-Iran peace deal hopes – business live
UK gilt yields fell to their lowest since mid-April as traders bet a US-Iran deal could ease oil-driven inflation. Markets also weighed fresh US strikes in the Middle East.
Intelligence analysis by GPT-5.4 Mini
Markets are reacting to hopes that talks between US and Iranian negotiators could reopen the Strait of Hormuz and cool energy prices. That pushed down government borrowing costs, even as fresh US strikes and rising Brent crude kept the outlook uncertain.
Bond prices in the UK went up, which made borrowing costs go down. That happened because traders hoped fighting in the Middle East might calm down and oil might stop getting so expensive.
When oil gets pricey, everything can cost more, like food, transport, and heating. That can make people worry about inflation, which is a bit like a price tide lifting lots of boats at once.
The problem is that the hope could still fade. New attacks in the region made investors nervous, so the market is treating the peace idea like a shaky bridge, not a finished road.
Analysis
Bonds rally on peace hopes
UK government borrowing costs fell sharply as traders returned from the holiday weekend and reacted to hopes that a US-Iran deal could reduce disruption to oil and gas flows from the Middle East. The 10-year gilt yield dropped to 4.824%, its lowest level since 21 April, while the 30-year yield fell to 5.49%, also the weakest since mid-April.
The move reflects a simple market calculation: if a deal helps reopen the Strait of Hormuz and stabilise energy supplies, oil prices could ease and inflation pressures could cool. That would reduce the need for higher interest rates and support bond prices. Brent crude was still higher on the day, near $98.57 a barrel, but it had slipped below $100 the previous day for the first time in two weeks.
The optimism is fragile. US and Iranian negotiators were meeting in Doha, but fresh US attacks on missile sites and on boats allegedly laying mines in the region raised doubts about how close a settlement really is. Deutsche Bank’s Jim Reid described the strikes as a warning that the ceasefire remains fragile. Daniela Hathorn of Capital.com said markets are still leaning optimistic, but negative headlines could now trigger a sharper reaction in oil, yields and shares.
The live coverage also noted a separate market-moving story in the UK: Melrose shares fell after a chemical leak at a California aerospace plant, while broader stock indices opened stronger on hopes that energy risks may not worsen further.
Key points
- UK 10-year gilt yields fell to 4.824%, the lowest since 21 April.
- 30-year gilt yields dropped to 5.49%, also the lowest since mid-April.
- Traders are betting a US-Iran deal could ease oil prices and inflation pressures.
- Brent crude rose 2.5% to about $98.57 a barrel, despite the peace hopes.
- Markets remain sensitive to fresh conflict headlines from the Middle East.
