For the data behind the commentary, download the full March 2026 UK Economy & Housing Report.
OPERATION EPIC FURY
On 28th February, the US and Israel launched coordinated military strikes against Iran, targeting military targets and Revolutionary Guard headquarters in and around Tehran. Supreme Leader Ayatollah Ali Khamenei was killed in the initial strikes, alongside other senior figures within the Islamic Republic. On 9 th March, his son Mojtaba Khamenei was named as the new supreme leader.
The conflict has spread beyond Iran's borders. Iran has conducted retaliatory missile and drone strikes against Israel, Qatar, the UAE, Saudi Arabia, Bahrain, Kuwait, and most recently Azerbaijan. Over 1,200 people have already been killed in Iran, 570 in Lebanon, 12 in Israel, and 7 US soldiers. On Tuesday 10 th March, the US declared its "most intense day of strikes" yet inside Iran, deploying its largest number of aircraft to date.
Oil markets have swung violently. On Monday 9 th March, Brent hit $119.50 intraday, the highest since mid-2022 and the largest single-day dollar move on record, before settling at $98.96 as Trump told CBS the war was "very complete, pretty much." Brent fell to $92.10 on Tuesday (down -6.9%) and has slipped further to around $87 in early Wednesday trading. Markets seem to be betting the US will halt the campaign before triggering a full energy crisis. However, Iran has been laying mines in the Strait of Hormuz, and the US has destroyed 16 Iranian mine-laying vessels in response. The Strait remains closed. Until it reopens, analysts warn crude could still reach $150/ bbl if closures extend through March.
UK gas prices followed a similar pattern, surging to 144p/ therm on Monday, the highest since January 2023 and nearly double pre-war levels, before pulling back to around 121p/ therm on Tuesday.
Gilts at the time of writing have come off their Monday peaks. The 10-year bond, which hit 4.74% on 9th March (up 16bps on the day), eased back to around 4.55% on Tuesday as oil retreated. In what feels like a lifetime ago, gilts had been trending down after positive government accounts data for January.
For the BOE, the picture is dramatically different from a fortnight ago. Markets are pricing a 91% chance of no change at the 19 th March MPC meeting. The rate outlook is almost entirely dependent on how quickly this resolves.
