Oil prices rose and global bonds experienced volatility on Monday, driven by escalating tensions in the Middle East and political uncertainty in the UK. Brent crude, the international benchmark, increased by up to 1.77% to $111.16 a barrel, its highest level in nearly two weeks, before easing back to $110. The surge followed an attack on a nuclear power plant in the United Arab Emirates and stalled peace talks between the US and Iran.
Former US President Donald Trump warned Iran on social media, stating, “For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them. TIME IS OF THE ESSENCE!” Iran responded to a new US proposal aimed at ending the war, with foreign ministry spokesperson Esmaeil Baqaei confirming that exchanges were continuing through a Pakistani mediator.
In the bond market, the benchmark 10-year US Treasury yield hit 4.631%, its highest since February 2025, before paring back to 4.599%. The UK 10-year gilt yield reached 5.19%, surpassing an 18-year high set on Friday, before falling to 5.15%. Volatility in UK bonds was also driven by political instability, as traders anticipated a potential leadership challenge to Prime Minister Keir Starmer from Manchester Mayor Andy Burnham.
UK Chancellor Rachel Reeves joined other G7 finance ministers in Paris to discuss the economic impact of the Middle East conflict. Mohit Kumar, chief economist at Jefferies, expressed concerns about a “shift to the left” in the UK, noting that the fiscal picture is already poor and further spending increases could be problematic. However, Burnham sought to calm investor fears, stating, “I support the fiscal rules, there needs to be a plan to get debt down.”
Stock markets in Europe opened lower, with the Stoxx Europe 600 dropping 0.7%, while the UK’s FTSE 100 was broadly flat. In Asia, Japan’s Nikkei fell about 1%, Hong Kong’s Hang Seng dropped 1%, and Shanghai’s SSE Composite slipped 0.1%, though South Korea’s Kospi closed 0.3% higher.
