Bank of England warns Iran war threatens stability

In its latest assessment, the central bank said the disruption has heightened the chance that existing vulnerabilities in financial markets could emerge at the same time, particularly across government debt, private credit, and high-value technology stocks, News.Az reports, citing Reuters.

Officials noted that the global economic environment has become significantly more unpredictable, with rising inflation pressures and higher borrowing costs adding strain to already fragile markets.

The Bank of England said the conflict has contributed to sharp increases in energy prices, with UK gas and fuel costs rising as global supply routes remain under pressure. It added that higher inflation could feed through into household energy bills and mortgage costs in the coming months.

Financial markets have also seen increased volatility, with UK government bond yields reaching levels not seen in years. The bank warned that concentrated trading strategies among some hedge funds could amplify risks if positions unwind suddenly.

The report also highlighted concerns about stretched valuations in major US technology firms, particularly those heavily exposed to artificial intelligence investment, noting that rising costs and supply chain pressures could add further strain.

Despite the risks, the Bank of England said the UK financial system remains broadly resilient, with households, businesses, and banks generally in strong positions compared to past crises.