UK 10-year bond yields soar past 5% as borrowing costs hit their highest level since 2008

British government borrowing costs surged to their highest since the 2008 financial crisis on Friday, with the benchmark 10-year rate crossing 5% as investors scrambled to price in rising inflation risks and a growing probability of interest rate hikes later this year.

U.K. government bonds – known as gilts – have undergone a sharp repricing amid the escalation of the Iran war. Yields on the benchmark 10-year gilt have jumped around 68 basis points in the 15 trading days since the conflict began, while the yield on the 2-year gilt has added about 97 basis points.

Bond prices and yields move in opposite directions.

On Friday, the yield on the U.K.’s 10-year government bonds

 surged around 15 basis points higher to 5.00%, its highest level since the 2008 financial crisis.

Meanwhile, sis points to around 4.602%, marking their highest level in more than a year.

Britain’s bond market has been particularly susceptible to fears of resurgent inflation as the U.S.-Iran war drags on, in part because of its reliance on imported energy. The war, and the subsequent blockade in the Strait of Hormuz – a critical oil shipping route – has led to a surge in oil and gas prices.

Even before the war broke out, the U.K. had the highest government borrowing costs of any G7 nation, with long-term 20- and 30-year gilts trading well above the crucial 5% threshold. The yields on those bonds jumped by around 9 and 7 basis points, respectively, on Friday