UK 10-year gilt yields topped 5% for the third time since the Iran war began, after Brent crude climbed above $111 following the breakdown of ceasefire talks between the U.S. and Iran. Britain's government borrowing costs have risen more than any other developed economy over the past two months, with the two-year gilt up over a full percentage point since the start of March. Analysts warn the UK is uniquely exposed to the energy shock given its dependence on oil and gas imports and a decade of above-target inflation, with the UK-U.S. yield spread now at 70 basis points. The spread between the 10-year gilt yield and the US Treasury's interest rate has now reached 70 basis points for only the second time since late 2025. "Over the past decade, the UK economy has suffered a succession of policy mistakes and resulting rates of inflation which have consistently exceeded the prevailing trends across other major economies," Kallum Pickering, chief economist at Peel Hunt, wrote in a note. "Unsurprisingly, it no longer takes much to spook UK government debt markets." The Bank of England has struggled to bring price rises to heel as successfully as rival central banks ever since Russia's full-scale invasion of Ukraine and Liz Truss's fateful mini-Budget combined to push inflation into double digits in 2022. Stubborn inflation is a major bugbear of bond investors, as price rises eat into the real returns one generates from bond over the course of its maturity. Kathleen Brooks, research director at XTB, said: "Yields are likely to creep higher as we lead up to the key central bank meetings this week, and as we wait to hear what happens next in the Strait of Hormuz."