UK borrowing costs jump again on fears Iran conflict will curb growth
UK borrowing costs jumped for a second day on Tuesday as the potentially damaging effects of the Iran conflict spooked investors concerned that growth will stall across the major industrial economies.Investors fear inflation will rise, driven by rising oil and gas prices, hitting businesses and households just as they are recovering from a long period of elevated inflation.Analysts said higher energy costs were likely to lead to price rises, forcing central banks to delay expected cuts in interest rates until later this year.Brent crude passed $83 a barrel on Tuesday, up from about $60 in December.The government had hoped that last month’s decline in inflation to 3% and a faster fall in Whitehall’s annual spending deficit would further push down the interest on UK debt.
However, the better-than-expected borrowing figures trumpeted by Rachel Reeves in her spring forecast speech on Tuesday failed to generate a positive bounce amid growing anxiety over the Middle East crisis,Since the conflict broke out at the weekend, market bets for Bank of England policymakers to cut interest rates when they next meet on 19 March have fallen from 80% to just 30%,Government borrowing costs have been on the rise,Yields on two-year gilts – effectively the interest rate – jumped as much as 16 basis points to 3,8% on Tuesday, although they later eased back to settle at nearer 10 points up.
David Aikman, director of the National Institute of Economic and Social Research, said: “The UK’s improved borrowing position announced in today’s spring statement has been overshadowed by the Middle East crisis,“If the crisis persists, higher energy prices will feed through to inflation, increasing borrowing costs further, putting serious pressure on the [budget] outlook,”Kathleen Brooks, a research director at the currency trader XTB, said: “There is no denying that the spring statement was unfortunately timed,UK bond yields are soaring on Tuesday, and this time it is not Rachel Reeves’s fault,“UK two- and 10-year gilt yields are higher … as the bond market prices in the worst-case scenario of a prolonged war in the Middle East and an energy-price inflation shock.
”Paul Dales, the chief UK economist at Capital Economics, said the Bank of England was probably more sensitive to the upside risk to inflation from the conflict than other central banks.Last month the Bank’s monetary policy committee held rates at 3.75% after a majority of policymakers said they wanted to wait and see how quickly inflation would fall before making further reductions.In its spring forecast assessment of the outlook for borrowing costs over the next five years, the Office for Budget Responsibility (OBR) said they had fallen significantly, benefiting the public finances.However, the latest increases in bond yields reversed gains made since last month when the OBR carried out its assessment.
David Miles, the forecaster’s chief economist, said predictions that inflation would fall to target levels early this year had become “more uncertain” after jumps in oil and gas prices linked to recent attacks in the Middle East.He said: “I think what will happen to inflation is particularly uncertain in the past few days.As I mentioned earlier and we all know, there have been very large increases in gas prices and oil prices.“Our central expectation had been that inflation would fall back towards the Bank of England’s 2% target early this year and will be around that level at the end of the year.There must be more uncertainty around that right now.
”Britain plans to issue £252,1bn of government bonds in the 2026-27 financial year, according to the UK Debt Management OfficeThe total compares with primary dealers’ median forecast of £245bn of gilt issuance in a Reuters poll, down from £303,7bn of issuance in 2025-26,
UK firms in Middle East face heightened threat from Iran hackers, agency warns
UK businesses with a presence in the Middle East have been urged to step up vigilance against cyber threats from Iran after US-Israeli attacks.The National Cyber Security Centre (NCSC) said there was “almost certainly” a heightened risk of an indirect cyber threat for organisations that had offices, or supply chains, in the Middle East.The UK’s cybersecurity agency said Iran remained a threat despite an extensive bombing campaign that has devastated the country’s political and military leadership, including the death of its supreme leader, Ayatollah Ali Khamenei.“Iranian state and Iran-linked cyber actors almost certainly currently maintain at least some capability to conduct cyber activity,” said the NCSC.The agency said in an alert published on Monday that there was “likely” no significant change in the direct cyber threat from Iran to the UK, but organisations should prepare for the risk of collateral damage from Iran-linked hacktivists
US military reportedly used Claude in Iran strikes despite Trump’s ban
The US military reportedly used Claude, Anthropic’s AI model, to inform its attack on Iran despite Donald Trump’s decision, announced hours earlier, to sever all ties with the company and its artificial intelligence tools.The use of Claude during the massive joint US-Israel bombardment of Iran that began on Saturday was reported by the Wall Street Journal and Axios. It underlines the complexity of the US military withdrawing powerful AI tools from its missions when the technology is already intricately embedded in operations.According to the Journal, US military command used the tools for intelligence purposes, as well as to help select targets and carry out battlefield simulations.On Friday, just hours before the Iran attack began, Trump ordered all federal agencies to stop using Claude immediately
Datacentre developers face calls to disclose effect on UK’s net emissions
Datacentre developers are facing pressure to reveal whether their projects will increase the UK’s net greenhouse gas emissions, amid concerns the sites could double national electricity demand.Campaign groups have written to the UK technology secretary, Liz Kendall, warning that the energy required by new AI infrastructure poses a “serious threat to efforts to decarbonise the electricity grid”.Developers should demonstrate that their projects will not cause an increase in the UK’s overall CO2 emissions or local water scarcity, as part of a forthcoming national policy statement (NPS) on datacentres, the letter says.“Without these commitments, such vast electricity use will inevitably generate vast climate emissions,” the campaigners write.The letter is signed by Foxglove, a group that campaigns against big tech dominance, and five other non-governmental organisations including the environmental campaign group Friends of the Earth
OpenAI to work with Pentagon after Anthropic dropped by Trump over company’s ethics concerns
OpenAI said it had struck a deal with the Pentagon to supply AI to classified US military networks, hours after Donald Trump ordered the government to stop using the services of one of the company’s main competitors.Sam Altman, OpenAI’s CEO, announced the move on Friday night. It came after an agreement between Anthropic, a rival AI company that runs the Claude system, and the Trump administration broke down after Anthropic sought assurances its technology would not be used for mass surveillance – nor for autonomous weapons systems that can kill people without human input.Announcing the deal, Altman insisted that OpenAI’s agreement with the government included assurances that it would not be used to those ends.“Two of our most important safety principles are prohibitions on domestic mass surveillance and human responsibility for the use of force, including for autonomous weapon systems,” Altman wrote on X
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On 7 August, Kate Fox received a phone call that upended her life. A medical examiner said that her husband, Joe Ceccanti – who had been missing for several hours – had jumped from a railway overpass and died. He was 48.Fox couldn’t believe it. Ceccanti had no history of depression, she said, nor was he suicidal – he was the “most hopeful person” she had ever known
Suicide forum found to be in breach of Online Safety Act after failing to block UK users
A suicide forum linked to deaths in Britain has been ruled provisionally in breach of the Online Safety Act after it failed to properly block access to UK users when ordered to do so last year.Ofcom, the online regulator, said it could now apply to the courts to demand internet service providers block access to the site in the UK. This will depend on how the site, which also faces fines, responds over the next 10 days.Coroners had been raising concerns about the links between the forum and suicides in the UK since at least 2019, campaigners said. The family of 17-year-old Vlad Nikolin-Caisley, from Southampton, said he took his own life in 2024 after using the site, which Ofcom is not naming
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