Middle East tensions and oil price surge rattle investors and UK politics
The article analyzes how escalating geopolitical tensions, particularly the standoff between Washington and Tehran over the Strait of Hormuz, have driven Brent crude oil prices above $85 per barrel, spooking investors on both sides of the Atlantic. The surge in oil prices, combined with the concurrent escalation of the Ukraine War and global refining capacity shortages, raises the specter of a renewed inflation shock. The traditional safe-haven role of government bonds is undermined by the inflationary nature of the shocks and high debt levels, leading to a painful sell-off. In the UK, benchmark ten-year gilt yields have spiked above 5%, eating into fiscal buffers and raising concerns about the incoming Prime Minister Andy Burnham's economic inheritance. Asset manager Rathbones has slashed its gilts holdings, fearing potential 'fiscal irresponsibility' reminiscent of the Truss era.
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