Gilt yields hit an 18-year high as renewed Middle East conflict sends oil surging
This week @ 15:30 pm Friday 4th September in London.
Markets:
- FTSE 100 was flat this week, dipping 0.07% to 10,816, as a fresh escalation in the US-Iran conflict pushed UK gilt yields to their highest level in 18 years, though a stronger UK composite PMI and a rebound in US sentiment provided some late-week support.
- S&P 500 rose 0.47% to 7,748, helped by a weaker dollar and lower Treasury yields after Federal Reserve Governor Christopher Waller signalled openness to holding rates steady in September, alongside continued strength in mega-cap technology stocks.
- Nasdaq Composite rose 0.81% to 26,615, driven by continued strength in technology stocks, including Nvidia’s announced $12.9bn acquisition of AI platform Hugging Face.
- STOXX Europe 50 fell 0.75% to 5,435, as European government bond yields climbed to multi-year highs on the back of rising oil prices and hawkish European Central Bank rate expectations, weighing on rate-sensitive sectors.
Bonds:
- UK 10-year gilt yields rose 8.1bps this week to 5.13%, their highest level since 2008, as renewed hostilities between the US and Iran pushed oil prices higher and reinforced market bets on a Bank of England rate hike by year-end.
- US 10-year Treasury yields rose 4.5bps to 4.77%, as hawkish signals from Federal Reserve officials earlier in the week were only partly offset by Fed Governor Christopher Waller’s subsequent dovish comments.
Commodities:
- Brent crude rose 6.04% this week to $93.42/bbl, as renewed US-Iran hostilities, including Iranian missile strikes on Kuwait, stoked fresh concerns over disruption to Strait of Hormuz shipping.
- Gold fell 1.18% to $4,476.30/oz, as rising expectations of a September Fed rate hike weighed on the metal for much of the week, before a partial recovery on Thursday after Fed Governor Waller signalled openness to holding rates steady.
- Copper rose 0.29% to $6.678/lb, as supply concerns linked to disrupted sulfuric acid supplies were broadly offset by demand worries tied to rising global bond yields.
FX:
- GBP/USD fell 0.11% to 1.3523, as both the Federal Reserve and the Bank of England were seen adopting a broadly hawkish stance this week, leaving the pair little changed overall.
- GBP/EUR fell 0.39% to 1.1640, as widely-held expectations for a European Central Bank rate hike at its 9-10 September meeting continued to support the euro against sterling.
Macro:
- UK composite PMI rose to 52.5 in August (from 52.2), a four-month high, though input cost pressures intensified.
- US non-farm payrolls rose by 162,000 in August, comfortably beating expectations of 53,000.
- Eurozone flash inflation accelerated to 3.3% in August (from 2.9%), its highest since September 2023.
Company news:
- Nvidia agreed to acquire AI platform Hugging Face for $12.9bn, its second-largest deal on record, as part of a push to expand its position across the AI software stack while committing to keep the platform open to the wider developer community.
- The US Department of Defence signed a new seven-year framework agreement with Lockheed Martin (and General Dynamics Ordnance and Tactical Systems) to increase production of THAAD and Patriot missile defence components, as the ongoing conflict continues to strain US interceptor stockpiles.
What we will be keeping an eye on next week…
w/c 7th September 2026
- European Central Bank rate decision: Thursday 10 September, with markets pricing a 25bp hike to 2.50%.
- UK GDP (July), alongside industrial production and trade data: Friday 11 September.
- US CPI (August): Friday 11 September, the last major inflation print before the Federal Reserve’s 16 September meeting.
Enjoy the weekend
Markets move constantly and the numbers in this update will change. This is a snapshot only, pulled together from a range of sources, and is meant as a quick guide rather than a precise record. It’s not investment advice and shouldn’t be used to make trading or investment decisions. If you need more accurate or specific data over a defined period, please get in touch with a member of the team who will be happy to help.
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