UK 10-Year Gilt Yield Hovers Above 3-Week Low

The UK 10-year gilt yield held near 4.95% on Friday, remaining above Tuesday’s three-week low of 4.891%, as higher oil prices revived concerns that central banks may need to keep interest rates elevated. Brent crude extended its gains for a second session amid supply concerns after Iran published a restrictive draft plan for the Strait of Hormuz. Although Iran and Oman are reportedly working on an agreement to establish transit routes through the waterway, no deal has yet been announced, keeping investors cautious. Despite the recent rise in yields, the UK 10-year yield remains around 9 basis points lower this week, supported by hopes that a reopening of the strait could eventually ease oil prices and inflation expectations. Meanwhile, the Bank of England left interest rates unchanged in July, with Governor Andrew Bailey saying the disinflation process remained on track despite ongoing external risks.

The UK 10-year gilt yield held near 4.90%, down more than 10 basis points this week as easing energy prices reduced expectations of further monetary tightening. Sentiment improved after Iran announced an agreement with Oman on a proposed shipping route through the Strait of Hormuz, raising hopes that energy flows through the critical waterway could resume. However, a broader US-Iran deal remains uncertain, with President Donald Trump saying he would “see what happens” in ongoing negotiations. Lower oil prices have eased concerns over inflation and weaker economic growth, reinforcing expectations that the Bank of England will maintain a gradual approach to policy tightening. That view was strengthened by last week’s Bank of England meeting, where Governor Andrew Bailey downplayed the need for further rate hikes, arguing that the disinflation process remains on track despite persistent geopolitical uncertainty.

UK 10-year gilt yields fell below 4.9%, reaching their lowest level since July 10, as a sharp decline in oil prices eased inflation concerns. Crude has dropped about 10% this week amid growing optimism that the US and Iran could reach a deal 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," boosting hopes of a resolution that could restore Middle Eastern energy supplies. Lower oil prices have eased concerns over renewed inflationary pressures and weaker economic growth, reinforcing expectations that the Bank of England will take a gradual approach to policy tightening. Last week's Bank of England meeting further supported that view, with Governor Andrew Bailey downplaying the need for additional rate hikes and saying the disinflation process remains on track.