Good morning and welcome back to the City AM liveblog. Thursday's local elections are threatening to send shock waves through the market, as Keir Starmer's position as Prime Minister teeters in the balance. Gilt yields hit a 28-year high on Wednesday, as investors weighed up the prospect of a new Prime Minister, with Ed Miliband, Angela Rayner and Andy Burnham circling to Starmer's left.
Market Sentiment Shaky
This shaky market sentiment comes as investors weigh the loose approach to fiscal discipline that any one of these figures is likely to bring to Downing Street. Fears of rising inflation are also prompting the gilt markets to shudder, as the Bank of England's unconvincing rate hold last week failed to preclude the potential of several rate hikes later this year. In further signs that Reeves' regime of fiscal 'stability' is under threat, City AM revealed this morning that the Treasury watchdog's own estimates – dating back to 2024 – suggest the Chancellor is set for a borrowing spree to keep a lid on inflation.
OBR Warning
A freshly uncovered Office for Budget Responsibility note said the government would have to borrow £23.1bn more a year if there were an energy supply shock 'comparable to the 1973 oil embargo' – and analysts have widely compared the Iran war to this crisis.
Trump's Reversal
In a sudden reversal late last night, President Trump said he will pause 'Project Freedom' in order to finalise a peace deal with Iran, boosting hopes of a permanent solution to the conflict. This comes as Trump's administration insists that the main part of their war with Iran is over. Secretary of State Marco Rubio said: 'The operation is over. Epic Fury – as the president notified Congress – we're done with that stage of it.'
The price of Brent crude oil is slightly down this morning, at $108.04, though well above the $100 mark. We'll be bringing you the latest as it unfolds.
Top Stories This Morning
- 'Clear risk signal': Gilt yields hit 28-year high as investors weigh Starmer's future
- KPMG faces staff uproar as job cuts expose communication breakdown
- OBR calculations suggest Reeves set for borrowing spree
- 'Political choice': Retailers urge government to act on rising costs
- A bank tax hangs in the balance at the local election ballot
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