UK government borrowing costs soar to highest since 2008 amid Iran war

Deficit rises unexpectedly to £14.3bn in February as markets price in up to three interest rate rises in 2026

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Investors wary of the impact of the Iran conflict dumped UK government bonds on Friday, pushing the yield, or interest rate, on 10-year borrowing to its highest level since 2008.

The market move followed the Bank of England’s decision on Thursday to leave interest rates on hold and hint at a future increase. By Friday morning, markets were pricing in as many as three interest rate rises in 2026.