Pound Plunges as Oil Shock Sends Yields Soaring Past 5%

The British Pound slid lower against the US Dollar on Tuesday as investors sought safe-haven assets amidst rising tensions in the Middle East and concerns over an oil supply shortage.

Oil benchmarks Brent and West Texas Intermediate surged by over 2.4% and 1.1%, respectively, pushing up US Treasury yields to a 15-year high of 5.041%. The 10-year yield has not been this high since 2007.

The escalation of the conflict in the Middle East led investors to seek refuge in the Dollar, which rose against major currencies including Sterling. The Greenback's haven status was further boosted by expectations that the Federal Reserve will increase interest rates by 25 basis points on September 16, with odds at 95%.

The Bank of England is expected to hold rates steady at its meeting on September 17, but markets are pricing in one rate hike towards the end of 2026, followed by another the following year. The Pound's decline was also influenced by weaker-than-expected jobs data from the UK, which showed wages outpacing vacancies and pushing unemployment to a near six-year high.