Middle East tensions and Ukraine war drive oil spike, spooking investors and UK bond markets
Rising geopolitical tensions, particularly the Washington-Tehran standoff in the Strait of Hormuz and concurrent escalation of the Ukraine war, have pushed Brent crude above $85/barrel, spooking investors on both sides of the Atlantic. The article warns that the old investment paradigm of government bonds as shock absorbers no longer works when shocks are inflationary and government debt levels are high. UK gilt yields have spiked above 5% for the first time since May, eating into fiscal buffers. Asset manager Rathbones has slashed its gilts holdings as a hedge against potential 'fiscal irresponsibility' under incoming PM Andy Burnham, with some investors fearing a repeat of the Truss-era market turmoil. The piece highlights that what matters for Main Street is not crude prices but refined fuel costs, and global refining capacity shortages exacerbate the risk.
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