The Iranian regime has fired a rhetorical salvo at Washington, denouncing the latest US airstrikes in the region as a 'gross violation' of the fragile ceasefire. For markets, this is noise. But when Tehran starts shouting about broken pacts, the risk premium on Brent crude tends to spike.
The question is whether this is a diplomatic squall or the precursor to a full-blown escalation. Gilts are already pricing in a flight to safety, with yields edging lower as investors hedge their bets. The bottom line: this administration's Middle East policy is a messy portfolio of sticks and carrots, and the market is struggling to find a hedge against the volatility.
Fiscal responsibility takes a back seat when the war drums beat, but the cost of instability always shows up in the bond market eventually.
