Brent Crude Hits $111 as UK Gilt Yields Climb to 2008 Levels Amid Geopolitical Tensions

U.S. and Iran broke down. This surge followed ongoing disruptions in the Strait of Hormuz.

U.S. gas prices rose 1.6 percent on Tuesday, the highest percentage increase in more than a month, reaching the highest level since the beginning of the war in Iran, according to The New York Times.

The yield on the UK 10-year gilt climbed above five percent on Tuesday, occurring for only the third time since the Iran war broke out. UK government borrowing costs have risen to their joint highest level since the 2008 financial crisis.

The yield on the UK two-year gilt has risen by more than one percentage point since the start of March. The spread between the UK 10-year gilt yield and the US Treasury interest rate has reached 70 basis points, happening for only the second time since late 2025.

The UK’s government borrowing costs have risen the most of any developed economy in the past two months, with moves particularly pronounced at the shorter end of the yield curve. Analysts have noted that a succession of policy errors and the UK’s reliance on oil and gas imports mean the British economy is particularly vulnerable to external shocks due to the knock-on effect on already elevated prices.

The path has exaggerated the pre-existing difference between the UK’s borrowing costs and those charged to the US. A central bank has struggled to bring price rises to heel as successfully as rival central banks ever since Russia’s full-scale invasion of Ukraine combined to push inflation into double digits in 2022.

Stubborn inflation remains a major concern for bond investors, as price rises eat into real returns over a bond's maturity.

Before the war, price rises had been forecast to moderate after three years above the central bank’s two percent target. Positive government borrowing figures, boosted by record tax receipts, had helped bring down borrowing costs over the first three months of the year, but these were disrupted by the Iran war and its effect on oil prices.