The Strait of Hormuz remains a pressure point, and Iran knows it. Yesterday’s statement from Tehran was classic brinkmanship: reopening the world’s most vital oil chokepoint is conditional on a broader deal to end the fighting. The Treasury will be watching gilt yields with a hawkish eye, because any sustained disruption here means higher petrol prices, higher CPI, and higher borrowing costs.
The market, however, is already pricing in a quick fix. That feels like wishful thinking. Tehran is not in the business of handing out favours for free.
They want concessions, and they want them now. The UK warning about oil price volatility is a tacit admission that Whitehall has run out of easy options. Fiscal headroom is gone.
Energy subsidies and windfall taxes have done their damage to investor confidence. Now we face a choice: pay Iran’s price at the negotiating table or pay it at the pump. Either way, the consumer gets squeezed and the bond market takes note.
The sheer inefficiency of using energy as a bargaining chip offends my every financial instinct. But that is the world we live in. For now, hedge your exposure to Gulf oil, keep an eye on the dollar, and brace for a bumpy ride in the gilts market.
