The yield on two-year British government bonds jumped to its highest level in over a month on Monday, triggered by escalating military clashes between U.S. and Iranian forces in the Gulf.
As the two nations exchanged missile and drone attacks, global oil prices surged, immediately reigniting fears of a fresh wave of global inflation, News.Az reports, citing Reuters.
In response, Britain’s two-year gilt yield—which is highly sensitive to shifting expectations around official interest rates—surged by 11 basis points on the day to hit 4.349%, its highest peak since June 11.
The sudden geopolitical shock has drastically altered market forecasts for the UK economy. Investors have pulled forward their expectations for the Bank of England’s next move, fully pricing in a quarter-point interest rate hike for November. Just days prior, a rate hike wasn’t fully anticipated until December.