Bank of England Warns of Rising Financial Risks Amid Iran Conflict and AI Debt
The Bank of England has issued a warning about increasing interconnected financial risks due to the ongoing conflict in Iran and the growing use of artificial intelligence. According to Reuters, the central bank pointed to these factors as contributing to a heightened concern that the risk of interconnected weaknesses in the financial system crystallizing has increased.
The Financial Policy Committee at the Bank of England stated that increases in oil and gas prices have pushed bond yields to levels not seen since 2008. Although the financial system and equity markets have remained resilient, the committee cautioned that a sharp adjustment persists.
The rapid increase in AI-related debt issuance has raised concerns about exposure to developments in AI, with global AI-related debt issuance totaling around $450 billion, double the level of 2025, according to Morgan Stanley. The Bank of England emphasized the need for rigorous model testing before and after deployment of AI systems, ahead of tighter regulation.