![\"A](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/03\/1774008730_823_1918.jpg\")
A chart showing the yield on UK 10-year bond yields Photograph: LSEG<\/p>\nUK borrowing costs hit highest since 2008 as inflation shock looms<\/p>\n
A key measure of UK government borrowing costs has hit its highest level since 2008, as traders bet that the energy price shock will push up interest rates.<\/p>\n
The yield, or interest rates, on 10-year UK gilts has risen to 4.927% this morning, a rise of 9 basis points (0.09 percentage points). That\u2019s the highest level since July 2008, in the run-up to the financial crisis.<\/p>\n
A chart showing the yield on UK 10-year bond yields Photograph: LSEG<\/p>\n
Yields rise when prices fall. This jump in borrowing costs is bad news for chancellor Rachel Reeves \u2013 it erodes the government\u2019s headroom to keep within its fiscal rules.<\/p>\n
The yield on shorter-dated, two-year, bonds has jumped by another 11 basis points to 4.522%. That\u2019s the highest since January 2025.<\/p>\n
These rising bond yields reflect expectations that UK inflation will rise to 3%, or higher<\/a>, this summer as the jump in energy prices hits households and businesses.<\/p>\n Share<\/a><\/p>\n Key events<\/p>\n Show key events only<\/p>\n Please turn on JavaScript to use this feature<\/p>\n Consultancy Oxford Economics<\/a> are predicting that UK CPI inflation will top 4% in the second half of this year \u2013 double the Bank of England\u2019s target.<\/p>\n This forecast is based on the continued disruption in the Strait of Hormuz and significant damage to energy infrastructure across the Gulf.<\/p>\n Senior economist Edward Allenby explains:<\/p>\n double quotation mark\u201cUnder our updated assumptions, we now anticipate a much sharper rise in petrol prices, while higher wholesale gas prices cause a 19% increase in the Ofgem energy price cap in July.\u201d<\/p>\n Oxford Economics have also cut their forecast for UK economic growth in 2026 and 2027, Allenby adds:<\/p>\n double quotation mark\u201cTherefore, we now project GDP growth of 0.4% this year and 1% next year, compared to our February baseline of 0.9% in 2026 and 1.3% in 2027, respectively.\u201d<\/p>\n Share<\/a>Why UK 10-year bond yields are highest since 2008<\/p>\n The jump in UK government borrowing costs to their highest level since 2008 today<\/a> shows there has been \u201ca sharp repricing of inflation risk\u201d, explains Lale Akoner, global market analyst at eToro:<\/p>\n double quotation markThe driver is the renewed energy shock, with oil prices surging and raising concerns about a second-round inflation wave. Markets have quickly shifted from expecting rate cuts to pricing a higher-for-longer path, with additional tightening now back on the table for the Bank of England.<\/p>\n \u201cThe move has been most aggressive at the front end, reflecting uncertainty around policy, but longer-dated yields are also rising as investors demand greater compensation for inflation and fiscal risk. The UK remains particularly exposed given its sensitivity to energy prices and already stretched public finances, which adds to upward pressure on borrowing costs.<\/p>\n \u201cThe Bank of England is in a difficult position. Growth remains weak and demand soft, limiting the scope for aggressive tightening, yet persistent inflation risks reduce flexibility. This tension is driving volatility across the curve.<\/p>\n \u201cFor investors, this is a classic rates shock environment. Higher yields driven by inflation, rather than stronger activity, tend to weigh on equities, pressure valuations, and challenge traditional diversification, particularly as correlations between bonds and risk assets become less reliable.\u201d<\/p>\n Share<\/a>Russian central bank cuts key rate by 50bps<\/p>\n Over in Moscow, Russia\u2019s central bank has gone against the trend this week by cutting borrowing cost.<\/p>\n The Bank of Russia has lowered its key interest rate by 50 basis points to 15%, down from 15.5%.<\/p>\n Announcing the decision, the central bank says Russia\u2019s economy is approaching a \u201cbalanced growth path\u201d, adding:<\/p>\n double quotation markIn February, price growth predictably decelerated after a temporary acceleration in January. The Bank of Russia estimates that the underlying measures of current price growth remain in the range of 4\u20135% in annualised terms. However, uncertainty regarding the external environment has increased considerably.<\/p>\n Share<\/a><\/p>\n Reuters reckons the sell-off in UK government debt today has been \u201cexacerbated\u201d by an Axios report on Friday that the Trump administration is considering plans to occupy or blockade Iran\u2019s Kharg Island to pressure Iran<\/a> to reopen the Strait of Hormuz.<\/p>\n Share<\/a><\/p>\n Updated at\u00a007.09 EDT<\/p>\n City expects three UK rate rises this year, back to 4.5%<\/p>\n City traders are now pricing that the Bank of England will raise UK interest rates three times this year, to battle inflation.<\/p>\n The money markets are now pricing in 80 basis points of increases to Bank rate by December \u2013 that indicates that three quarter-point rate rises are fully priced in, taking rates back up to 4.5%, from 3.75% at present.<\/p>\n Yesterday the Bank of England left interest rates on hold, and warned that the \u201cnew shock\u201d to the economy from the Middle East conflict would lead to higher than previously expected inflation in the short term.<\/p>\n Speaking after the meeting, BoE governor Andrew Bailey suggested that markets were getting ahead of themselves by forecasting rate rises.<\/p>\n He told broadcasters:<\/p>\n double quotation mark\u201cI would caution against reaching any strong conclusions about us raising interest rates…. Today we\u2019ve given a very clear message. The right place to be is on hold.\u201d<\/p>\n Share<\/a>UK borrowing costs hit highest since 2008 as inflation shock looms<\/p>\n A key measure of UK government borrowing costs has hit its highest level since 2008, as traders bet that the energy price shock will push up interest rates.<\/p>\n The yield, or interest rates, on 10-year UK gilts has risen to 4.927% this morning, a rise of 9 basis points (0.09 percentage points). That\u2019s the highest level since July 2008, in the run-up to the financial crisis.<\/p>\n A chart showing the yield on UK 10-year bond yields Photograph: LSEG<\/p>\n Yields rise when prices fall. This jump in borrowing costs is bad news for chancellor Rachel Reeves \u2013 it erodes the government\u2019s headroom to keep within its fiscal rules.<\/p>\n The yield on shorter-dated, two-year, bonds has jumped by another 11 basis points to 4.522%. That\u2019s the highest since January 2025.<\/p>\n These rising bond yields reflect expectations that UK inflation will rise to 3%, or higher<\/a>, this summer as the jump in energy prices hits households and businesses.<\/p>\n Share<\/a>Wetherspoon’s boss blames Reeves, Iran and temperance movement for profits slump JD Wetherspoon\u2019s boss, Tim Martin, warned that beer prices are likely to rise, blaming an unlikely triumvirate of Rachel Reeves, Iran<\/a> and the return of a Victorian-era-style temperance movement, as the pub chain recorded a slump in profits.<\/p>\n Sales in the first half of the year were up by 5% to nearly \u00a31.1bn on a like-for-like basis, ahead of the wider sector.<\/p>\n But pre-tax profit fell by 32% to \u00a322.4m, prompting a 12% fall in the pub chain\u2019s shares in early trading.<\/p>\n Martin – who is known for his outspoken views on politics – pointed the finger at external factors as he warned that full year profits could undershoot expectations.<\/p>\n Top of his list are \u201cpressure on consumer finances, combined with higher taxes, wages and energy costs\u201d.<\/p>\n The chain expects an extra \u00a370m in costs, mostly due to national insurance and national minimum wage increases.<\/p>\n \u201cThese cost increases will undoubtedly add to underlying inflation in the UK economy, although Wetherspoon, as always, will endeavour to keep price increases to a minimum,\u201d he said.<\/p>\n Martin also warned that prices for consumers are likely to increase due to the Iran war.<\/p>\n double quotation mark\u201cThe lesson from the 1970s is that when energy prices go up everyone becomes poorer apart from oil producers.\u201d<\/p>\n He also said pubs were at risk from lower rates of alcohol consumption, lashing out at a perceived \u201crevival of the temperance movement, which appears to have surreptitiously infiltrated the mainstream media and the medical profession.\u201d<\/p>\n Share<\/a><\/p>\n The cascading effects of Middle Eastern instability on supply chains threaten more shocks to energy and food security in Britain, the Strategic Climate Risks Initiative are warning today.<\/p>\n Laurie Laybourn, executive director of the SCRI, says there is the risk of a shock to UK food security:<\/p>\n double quotation mark In recent years, extreme weather has caused three out of the five worst arable harvests on record in the UK. A wet spring and a potentially climate-charged summer mean that farmers do not need another shock. Yet it\u2019s coming – as a result of rising fertiliser prices, with many fertilisers usually passing through the Strait of Hormuz. It\u2019s a perfect storm for farmers: higher fertiliser and fuel costs and worsening climate extremes.<\/p>\n In response, more is needed to support farmers to reduce their reliance on volatile fertiliser supplies and farm more sustainably, as part of a wider food security strategy for a more volatile world.<\/p>\n Share<\/a><\/p>\n This morning\u2019s surprise jump in UK borrowing to over \u00a314bn in February<\/a> means a renewed focus on whether the government has the fiscal space for a new cost-of-living support package, if energy prices remain high.<\/p>\n Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK has said the jump \u201chighlights the precarious fiscal position the UK is in\u201d, warning that the Iran<\/a> war will put further strain on the public finances.<\/p>\n Pugh says:<\/p>\n double quotation mark\u201cWhile widespread government support on the scale of the last crisis looks unlikely, and probably unnecessary unless energy prices rise further, the scheduled rise in fuel duty now seems in doubt. More importantly, if maintained through to the autumn, the surge in inflation, gilt yields and likely further rise in the unemployment rate could easily halve the Chancellor\u2019s fiscal headroom.<\/p>\n Investec analysts are confident that the UK deficit is still on a downward path, adding:<\/p>\n double quotation markOverall the figures are not quite as disappointing as the headline suggests. Even so the public finances face a number of challenges arising from the war in the Middle East, as a combination higher inflation and the rise in gilt yields raises financing costs. Moreover any energy relief packages to households and business would also increase borrowing, albeit perhaps for a limited period.<\/p>\n Share<\/a>Energy price shock could add \u00a31,500 per year to mortgage costs<\/p>\n UK mortgage rates have risen again today, even though the Bank of England left base rate on hold yesterday, at 3.75%.<\/p>\n Data provider MoneyFacts reports that the average two-year fix residential mortgage rate has risen from 4.83% at the start of March to 5.35% today. That shift will have added around an extra \u00a3900 per year to the cost of borrowing \u00a3250,000 over 25 years.<\/p>\n It\u2019s already the highest two-year fixed mortgage rate since March 2025 (up from 5.32% on Thursday).<\/p>\n Five-year fixed mortgage rates are pricier too \u2013 with the average rate up from 4.95% at the start of March to 5.39% today. That\u2019s the highest since July 2024, adding around an extra \u00a3775 per year to the cost of borrowing \u00a3250,000 over 25 years.<\/p>\n Moneyfacts has calculated that if Bank rate rises to 4% or 4.25%, as market pricing predicts, average rates on new mortgages could stabilise at around 5.50% to 5.75%.<\/p>\n That could add an extra \u00a31,000 – \u00a31,500 per year to the cost of borrowing \u00a3250,000 over 25 years compared to rates at the beginning of March.<\/p>\n Adam French, head of consumer finance at Moneyfacts, explains:<\/p>\n double quotation mark\u201cSwap rates, which underpin mortgage pricing, have risen sharply following the decision to hold the base rate at 3.75%, with markets interpreting commentary from the Bank of England as leaving the door open to rate rises amid \u2018Trumpflation\u2019 fears. With two- and five-year swaps now sitting at their highest level in more than a year, lenders are once again facing higher funding costs, and this will feed through into mortgage pricing.<\/p>\n \u201cMoneyfacts analysis of more than 30 years of historic rates data shows mortgage rates have historically averaged around 1.5 percentage points above Base Rate. If markets continue to price in one or two rate rises, this could see average new mortgage rates stabilise at around 5.50% to 5.75%. That would leave borrowers paying \u00a31,000 to \u00a31,500 more per year on a typical \u00a3250,000 mortgage compared to just a few weeks ago.<\/p>\n \u201cWhile a quicker resolution to the conflict in the Middle East could ease pressure on rates, the reality is that a more volatile world is a more expensive world. Even though the most competitive deals will remain below average, anyone looking to buy or remortgage this year needs to prepare for higher costs than previously expected.\u201d<\/p>\n Share<\/a>British energy price cap tipped to rise by \u00a3332 per year in July due to oil and gas shock<\/p>\n British energy bills are on track to jump by several hundred pounds per year once the official price cap is adjusted this summer.<\/p>\n Consultancy Cornwall Insight has predicted that the bill for a typical dual fuel consumer will rise to \u00a31,973 per year in July, when the next quarterly review of the cap comes in.<\/p>\n That would be a \u00a3332 rise from April\u2019s cap, of \u00a31641 a year<\/a> for an average bill-payer, and hurt strugging families [there\u2019s no cap on the maximum bill, just the maximum charge for each unit of energy].<\/p>\n This prediction may harden calls for the government to launch a \u201csocial tariff\u201d providing cheaper energy for poor households amid growing concerns over the Iran<\/a> conflict.<\/p>\n The quarterly price cap is set based on the average energy prices in the three-month period before it is set (mid-Februry to mid-May), so the jump in oil and gas prices in recent weeks will have an upward effect on the cap.<\/p>\n Share<\/a><\/p>\n Updated at\u00a005.21 EDT<\/p>\n Despite the dip in energy prices this morning, UK inflation is still expected to jump this summer.<\/p>\n Sanjay Raja, chief UK economist at Deutsche Bank, expects inflation to rise over 3% this year, rather than drop towards the official 2% target.<\/p>\n He writes:<\/p>\n double quotation markWhere to next? In our view, the inflation outlook has rarely been more uncertain than it is now. The Iran conflict has resulted in a surge in energy prices. Oil prices are tracking nearly 50% higher than pre-conflict levels. Gas futures are trading nearly 90% higher. The impact on the inflation outlook we expect will be meaningful.<\/p>\n While we do not account for fiscal support in our updated projections, we think there is a high likelihood that government support can help curb energy inflation. For now, we condition our projections on market expectations as of 18 March. This has pushed our 2026 CPI projections up from 2.4% (in our last update) to 3%, with a peak CPI of nearly 3.2% y-o-y expected later this year.<\/p>\n Share<\/a><\/p>\n The London stock market is rallying this morning, led by travel and hospitality firms.<\/p>\n The FTSE 100 index has gained 50 points, or 0.5%, to 10,113, having yesterday tumbled by 2.35%.<\/p>\n Intercontinental Hotels (+3.3%), easyJet (+2.9%) and British Airways parent company IAG (+2.7%) are the top risers.<\/p>\n Stocks are rising as energy prices ease back, following efforts by the US and Israel to reassure investors unsettled by the latest escalation in the Middle East.<\/p>\n Jim Reid, market strategist at Deutsche Bank, takes a historic view:<\/p>\n double quotation markToday will be the 15th trading day of the conflict so far\u2026that is on average when we bottom out in US equities after a geopolitical shock.<\/p>\n However it would be hard to trade on the back of averages at the moment with so much uncertainty so headlines will be more important than history here but if you\u2019re looking for optimism the normal geopolitical playbook would at least give you hope.<\/p>\n Share<\/a>Oil and gas prices dip after Netanyahu agrees to ‘hold off’ attacks on Iranian gas fields<\/p>\n Oil and gas prices are dropping today, after Israeli prime minister Benjamin Netanyahu indicated he would hpld off on further attacks on Iran\u2019s gas field at the request of US President Donald Trump.<\/p>\n The Brent crude oil price has dipped by 1.7% to $106.75 a barrel this morning. That\u2019s rather lower than yesterday\u2019s high of $119, but still nearly 50% higher than before the conflict began.<\/p>\n Gas prices are dipping too. The month-ahead UK gas price is down 2% at 153p per therm. That\u2019s down from a high of 180p yesterday, but still almost double levels before the Iran war began.<\/p>\n Continental European gas prices are down 1.9%.<\/p>\n This comes after Netanyahu told reporters at a press conference that Israel \u201cacted alone\u201d in striking Iran\u2019s South Pars gasfield this week.<\/p>\n He added:<\/p>\n double quotation mark\u201cPresident Trump asked us to hold off on future attacks, and we\u2019re holding out.\u201d<\/p>\n Israel has, though, been pounding Tehran with airstrikes today.<\/p>\n Our Middle East Crisis Live blog has all the details:<\/p>\n Share<\/a><\/p>\n Updated at\u00a004.36 EDT<\/p>\n \u2018Demand destruction has begun\u2019<\/p>\n JP Morgan have published a very interesting note on the demand destruction theme, which FT Alphaville have covered here<\/a>.<\/p>\n They\u2019ve examined the economic damage that the oil market crisis is beginning to cause in Asia, and report:<\/p>\n double quotation markDiesel has emerged as the region\u2019s immediate choke point, with surging prices slowing both travel and freight. Governments are responding with a mix of demand management and emergency measures. Bangladesh brought forward the Eid-al-Fitr holiday and allowed universities to close early to save fuel. The Philippines and Sri Lanka instituted four\u2011day workweeks to curb diesel use and stretch dwindling stocks. Pakistan closed schools and shifted universities online. Officials in Thailand and Vietnam have been urged to use stairs, work from home, and limit travel, while Myanmar introduced alternating driving days to reduce road fuel demand. In parallel, authorities are intervening directly into fuel markets to stabilize fuel prices.<\/p>\n Other key points include:<\/p>\n As jet fuel approaches $200\/bbl, carriers are shifting from cost management to outright service withdrawal, with many routes rendered uneconomic<\/p>\n In many regions, demand isn\u2019t being reduced by choice but by the physical absence of input<\/p>\n Oil demand is, on average, highly inelastic in the short run because most end uses have few immediate substitutes \u2014 factory boilers rely on fuel oil, aircraft require jet fuel, and most cars still run on gasoline.<\/p>\n More here<\/a>.<\/p>\n Share<\/a>World\u2019s energy watchdog advises emergency measures as oil prices rise The world\u2019s energy watchdog has advised governments to reduce highway speeds and encouraged workers to carpool or, ideally, work from home to combat soaring oil prices and impending fuel shortages caused by the Middle East conflict.<\/p>\n It has also recommended countries consider limiting car access to designated zones in large cities, by giving vehicles with odd-numbered plates access on different weekdays to those with even-numbered plates.<\/p>\n The International Energy<\/a> Agency (IEA) has advised member countries, including Australia, the UK and the US, to take the emergency measures to curb oil demand, following the military strikes on Iran that have triggered the most significant supply disruptions in the history of the global oil market.<\/p>\n Share<\/a>UK borrowing jumps to over \u00a314bn in February<\/p>\n Britain\u2019s government borrowed more than expected last month, new data shows.<\/p>\n The difference between total public sector spending and income widened by \u00a32.2bn year-on-year in February, to \u00a314.3bn.<\/p>\n That\u2019s more than expected \u2013 the City had expected a \u00a38.5bn deficit for the month.<\/p>\n It\u2019s also the second highest February borrowing since monthly records began in 1993, behind that of 2021 during the Covid-19 pandemic.<\/p>\n It follows a record surplus in January, though, when a surge in tax payments boosted the government\u2019s receipts.<\/p>\n So, after 11 months of the financial year, borrowing is 8.7% less than in the same 11-month period a year ago.<\/p>\n Today, ONS senior statistician Tom Davies says:<\/p>\n double quotation mark\u201cBorrowing was higher than the same month last year and was the second-highest February figure on record. While receipts were up on last year, that was outweighed by a rise in spending, including the later timing of some debt interest payments.<\/p>\n \u201cHowever, across the first eleven months of this financial year as a whole, borrowing was down, as receipts increased by more than spending.\u201d<\/p>\n Share<\/a>Introduction: Demand destruction fears rise after Iran war drove up oil and gas prices<\/p>\n Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.<\/p>\n![\"Rob](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/03\/RobDavies.jpg\")
Rob DaviesThe Royal Pavilion, a Wetherspoon pub in Ramsgate,Kent Photograph: Bax Walker\/Alamy<\/p>\n![\"Jonathan](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/03\/1774008731_421_Jonathan_Barrett.png\")
Jonathan Barrett<\/p>\n