The Bank of England kept Bank Rate unchanged at 3.75%, with an 8–1 vote split as one policymaker backed a rise to 4.00%. The hold reflects concern that the Middle East conflict has lifted energy costs and could slow the UK's fall in inflation. Inflation is still above target at 3.3%, while mortgage costs have already risen: the average two-year fixed deal moved from 4.83% at the start of the conflict to a peak of 5.90%, and remains around 5.81%. This keeps pressure on households and makes near-term rate cuts less likely. The Bank appears worried that higher fuel and utility bills could feed into wider prices and wages. UK gilts sold off after the decision, with yields rising, while sterling strengthened as investors priced in tighter policy for longer.