UK Gilt Yield Surges Above 5% Amid Oil Price Frenzy

The UK 10-year gilt yield surpassed 5% due to rising oil prices and inflation concerns. Brent crude exceeded $89 per barrel following tensions between the US and Iran, with President Donald Trump issuing tougher demands on Tehran.

Higher energy costs are particularly worrisome for the UK, a net oil importer struggling with persistent inflation. As a result, expectations grow that the Bank of England may need to maintain higher interest rates longer than anticipated.

Markets now fully price in rate hikes by December and another by spring. Meanwhile, July's UK retail sales rose 1.3% year-on-year, below the 12-month average, while consumer spending increased 2%, its strongest growth this year, according to Barclays data.