Rising tensions between the United States and Iran have wiped out weeks of gradual recovery across global financial markets, sending investors scrambling.
The US military’s central command confirmed it had struck around 90 Iranian targets in its latest wave of action, marking a significant escalation in hostilities.
Iran responded by launching strikes on military sites in Bahrain and Kuwait, broadening the geographic reach of the conflict across the region.
Tehran’s regime has also threatened a “massive” attack in direct response to the wave of US strikes, raising fears of a prolonged and intensifying confrontation.
Speaking at the Nato summit in Turkey, Donald Trump said: “We just hit them very hard, and I say we hit them 20… they hit us, we’re going to hit them 20.”
Trump also told a news conference that he no longer wishes to pursue a negotiated settlement with Iran, stating plainly: “Let’s just finish the job.”
The renewed hostilities have delivered a sharp blow to the UK economy, with 10-year gilt yields surging 13 basis points higher to 4.98 per cent as borrowing costs climbed.
The spike in gilt yields reflects growing investor anxiety about the economic consequences of a prolonged Middle Eastern conflict on energy supply and global trade flows.
The US and Iran had reached a memorandum of understanding on 17 June, which paused military action for 60 days while the two sides worked towards a lasting peace deal.
However, deeply contentious issues including Iran’s nuclear capabilities and control over the Strait of Hormuz continued to complicate negotiations and unsettle financial markets.
Oil prices have crept higher amid the instability, adding further pressure to an already fragile global economic outlook shaped by energy supply uncertainty.
The Strait of Hormuz remains one of the world’s most critical shipping chokepoints, and any disruption to traffic there would have immediate consequences for global oil markets.
UK gilt markets have been particularly sensitive to geopolitical shocks this year, with borrowing costs already elevated before the latest escalation added fresh strain.
Analysts will be watching closely to see whether the breakdown of the 17 June memorandum signals a full collapse of diplomatic efforts or a temporary setback in negotiations.