Leading Indicators | Markets reprice amid new pressures

Near-term disruption, but oil prices are still expected to normalise

Brent crude has moved higher again, reaching nearly $98 per barrel as renewed US-Iran tensions and disruption to Middle East shipping routes fuel concerns over global supply. While prices are likely to remain elevated and volatile in the near term, Oxford Economics expects oil prices to ease as geopolitical risk premiums unwind, with Brent Crude falling from an average of around $85 p/b over the remainder of 2026 to $65 p/b by end-2027.

Global yields reset higher, bringing UK fiscal headroom into focus

Global bond yields have moved higher as inflation, fiscal and policy uncertainty keep term premia elevated. Although rising energy prices and heavy government debt issuance have contributed to the move, the recent sell-off remains well short of 2022 levels. In the UK, 10-year gilt yields have risen around +63bps YTD, compared with roughly +200bps over the same period in 2022. Even so, higher borrowing costs are bringing the October Budget into sharper focus, where the Chancellor's room for manoeuvre is likely to be more constrained.

Lending recovers, but appetite remains selective 

After a weak June, UK CRE lending rebounded to £1.53bn in July, returning to levels seen earlier in the year. Investment lending accounted for £1.47bn of activity, while development lending remained subdued at £59m. We expect lending activity to remain resilient through H2, although higher gilt yields are likely to keep financing costs elevated and maintain lender selectivity, particularly beyond prime, income-resilient assets.