Bank of England Governor Andrew Bailey is sounding the alarm on financial stability risks tied to the escalating Middle East conflict, warning G20 officials that the resumption of hostilities between Iran and Israel is creating dangerous ripple effects across global markets.
Energy shocks and frozen rate cuts
Bailey has made clear that UK interest rates are staying put at 3.75%, and the reason has less to do with what’s happening on British high streets than what’s happening in the Strait of Hormuz.
The critical waterway has been blocked, choking off one of the world’s most important energy transit routes. Energy prices remain stubbornly above pre-conflict levels, feeding directly into inflation numbers that central bankers were hoping to see cool down.
In June 2026 remarks, Bailey said there is “no rush” to change interest rates while the Middle East situation continues to evolve.