Markets slide on report US to send more troops to Middle East, as UK borrowing costs hit highest since 2008 – business live

• UK 10-year bond yields hit 4.927%, the highest since July 2008, as investors anticipate inflation shock from disrupted oil and gas supplies through the Strait of Hormuz
• The FTSE 100 index fell into negative territory for 2026, erasing all year-to-date gains after Reuters reported the USS Boxer and Marine Expeditionary Unit are deploying to the region three weeks ahead of schedule
• British household energy bills are projected to rise by £332 per year in July, with mortgage costs potentially increasing by £1,500 annually as the Bank of England faces pressure to raise rates despite weak economic growth

Market Summary: UK Borrowing Costs Surge Amid Middle East Tensions

Key Developments

UK Borrowing Costs Hit Crisis-Era Highs

• UK 10-year gilt yields reached 4.927%, highest since July 2008
• 2-year bond yields climbed to 4.522%, highest since January 2025
• Money markets now pricing in three quarter-point interest rate increases in 2026, pushing rates to 4.5% from current 3.75%

Market Reaction to Geopolitical Escalation

• FTSE 100 erased all 2026 gains, falling 1.46% (146 points) to 9,917 points
• Markets plunged on reports of US deploying additional Marines and Sailors to Middle East, with USS Boxer departing three weeks ahead of schedule
• Sterling dropped over a cent to $1.331 as US dollar strengthened
• BP shares fell 3.6%; Antofagasta down 3.4%

Energy and Inflation Impact

• British energy price cap expected to rise £332 annually in July
• Energy price shock could add £1,500 per year to mortgage costs
• Oxford Economics forecasts UK inflation will exceed 4% in H2 2026, double the Bank of England's target
• Oil prices stabilized around $107/barrel after hitting $119 this week

Economic Forecasts Slashed

• Oxford Economics cut UK GDP growth forecast to 0.4% for 2026 and 1% for 2027 (from 0.9% and 1.3% respectively)
• IEA chief warns politicians and markets are underestimating disruption, estimating minimum six-month restoration period for Gulf oil/gas flows

Other Developments

• UK borrowing jumped to over £14bn in February
• FCA launched investigation into collapsed mortgage lender MFS
• Russia's central bank cut rates by 50 basis points to 15%