UK borrowing costs hit 1998 high as oil prices surge on Middle East blockade fears

UK long-term borrowing costs have hit their highest level since 1998 as global oil prices near Iran war peaks on fears of extended disruption to flows from the Middle East. The yield - the interest rate demanded by investors to hold 30-year government bonds - stood above 5.7% ahead of Wednesday's close while its 10-year counterpart also hit its highest since July 2008, according to the Reuters news agency. The UK is not alone in facing bond market pressure as a result of the strains facing economies from rising energy prices but its yields, the highest in the G7 of advanced economies, reflect additional investor concern over the state of the public finances and sticky inflation that has long preceded the Middle East conflict. The pace of price increases in the economy is set to pick up in the coming months as rising oil prices feed in beyond fuel and heating to include household energy, food and many other goods. The lack of results in peace efforts between the US and Iran was clear to see on oil markets on Wednesday, following several false dawns earlier this month on White House claims of progress. A barrel of Brent Crude for June delivery was up by almost 7%, just above $119 at one stage in volatile trading. The intraday peak during the war to date came on 9 March and stood at $119.50. The FTSE 100 ended the day almost 1.2% lower, building on losses across the week that reflected growing worries for the UK and wider global economy. Neil Wilson, investor strategist at Saxo UK, said of the mood: "Stock markets sold off and oil climbed as President Trump told aides to prepare for prolonged blockade (of the Strait of Hormuz) instead of return to conflict. He's apparently met US oil executives today and may be seeking ways to boost domestic production to offset the impact of a longer blockade."