Bank of England holds interest rates amid Iran war fallout

On Thursday, the Bank of England (BoE) held its key interest rate at 3.75%, as widely expected, amidst ongoing geopolitical uncertainty sparked by the Iran war. The central bank acknowledged that higher inflation, driven by energy price increases, is now unavoidable.

This decision impacts UK households and businesses, with mortgage holders and consumers facing potential rate hikes later this year. The BoE's warning of higher inflation could also drive demand for inflation-linked bonds and commodities, while negatively impacting real estate investment trusts (REITs) and other sectors sensitive to interest rate changes.

Investors should now watch for the UK's inflation data on February 19, the BoE's next interest rate decision on March 21, and any further escalations or de-escalations in the Middle East conflict, as these catalysts will shape the BoE's response to rising inflation.