FTSE 100 Drops 1.7% as UK Gilt Yields Hit 6% Highs

UK equities slid on Thursday as a sharp global bond selloff pushed 30-year gilt yields above 6% for the first time since February 1998, compounded by lingering geopolitical tensions between the United States and Iran that kept oil prices elevated. The simultaneous debt market pressure and cross-border standoff weighed heavily on European trading floors.

"We have never avoided dialogue with Washington, although the United States targeted our country three times," said Iranian President Masoud Pezeshkian in statements reported by Tasnim, touching on the ongoing bilateral friction.

European Market Declines and US Yields

The market downturn stretched across major European indices alongside the UK selloff. According to an Investing.com report, the blue-chip FTSE 100 dropped 1.68%, France's CAC 40 lost 1.62%, and Germany's DAX fell 0.87%.

Bond markets absorbed heavier pressure globally. In the United States, 10-year Treasury yields climbed to 5.362% on Wednesday, driven by investor concerns regarding persistent inflation, expanding federal budget deficits, and heavy sovereign bond supply.

Military Reorganization Amid Regional Standoffs

Geopolitical risks remained pronounced in the Middle East, where more than 50,000 U.S. troops remain stationed. Amid these regional deployments, Defense Secretary Pete Hegseth announced plans to cut the Pentagon's general and admiral ranks by 20% while establishing a dedicated autonomous warfare command.

Domestically, macroeconomic pressures also showed up in the UK housing sector. Annual house price growth slowed to a nine-month low of 0.8% in September, easing from 1.6% in August, according to data from mortgage lender Nationwide.

What the Debt Selloff Means for Borrowing Costs

Surging sovereign yields reflect investors demanding higher returns to hold long-term government debt, which directly feeds into higher corporate borrowing costs, commercial loans, and mortgage rates across the broader economy.