Business

Expectations for UK interest rates have shifted dramatically after the surge in global oil prices triggered by the widening conflict in the Middle East, with investors now increasingly betting that borrowing costs could rise rather than fall in 2026.

Financial markets are pricing in roughly a 70 per cent chance that the Bank of England will increase interest rates by a quarter percentage point before the end of the year, a stark reversal from expectations only a fortnight ago when traders anticipated multiple rate cuts.

Just two weeks earlier, markets had predicted that the Bank would begin reducing its base rate from the current 3.75 per cent, with the first cut expected at the Monetary Policy Committee meeting scheduled for 19 March.

Instead, the escalating war involving Iran, Israel and the United States has dramatically reshaped the economic outlook by sending energy prices sharply higher and threatening a fresh surge in global inflation.

The shift in interest rate expectations has been driven primarily by a rapid escalation in oil prices following disruptions to shipping routes through the Strait of Hormuz.

The international oil benchmark Brent crude oil surged nearly 30 per cent within days, briefly trading just below $120 per barrel, its highest level since the energy crisis of 2022.

At the same time, the US benchmark West Texas Intermediate crude oil recorded its largest weekly gain on record as traders feared a prolonged disruption to global energy supplies.

The Strait of Hormuz. which carries around one-fifth of the world’s oil exports, has effectively been closed to normal commercial shipping following Iranian threats to target vessels using the route.

Energy traders warn that continued disruption could lead to sustained shortages of oil and gas in global markets.

While rising oil prices pose a global inflation risk, the UK economy is considered especially vulnerable because of its heavy reliance on imported natural gas to heat homes and power electricity generation.

Wholesale gas prices in Britain have already surged in response to the conflict, raising concerns that household energy bills could spike again later this year.

Industry analysts have warned that the UK energy price cap could increase by as much as £500 during the summer if current wholesale gas prices persist.

Higher energy costs would likely feed through into transport, food production and manufacturing supply chains, pushing overall inflation significantly higher.

Economists at Deutsche Bank forecast that UK inflation could approach 4 per cent by the end of 2026, double the Bank of England’s official 2 per cent target if the conflict continues to disrupt energy markets.

The sudden change in expectations has triggered heavy turbulence in UK government bond markets.

The yield on the benchmark ten-year gilt, a key measure of government borrowing costs, has jumped by around 0.4 percentage points in a week to 4.74 per cent, marking the sharpest increase among major developed economies.

Bond yields rise when investors sell government debt, signalling expectations of higher inflation or tighter monetary policy.

Analysts said the move represented the most intense sell-off in UK bonds since the financial turmoil triggered by the 2022 “mini-budget” announced by former Prime Minister Liz Truss.

Short-term borrowing costs have risen even faster. The yield on two-year gilts, which are particularly sensitive to interest rate expectations, surged by as much as 0.25 percentage points in a single trading session.

The rapid repricing of financial markets reflects the view that central banks may now have to maintain tighter monetary policy for longer in order to contain inflationary pressures.

Dario Perkins, head of global macro at the economic consultancy TS Lombard, said the oil shock had fundamentally altered the outlook for interest rates.

“Inflation is already overshooting targets and, in policymakers’ minds, that makes expectations more fragile,” he said. “For now, all rate cuts have been postponed.”

The shift is not limited to the UK. Investors are also beginning to price in the possibility that the European Central Bank could raise interest rates later this year, reflecting the eurozone’s heavy reliance on imported energy.

Major central banks around the world are now reassessing the economic impact of the Middle East conflict.

Next week both the ECB and the Federal Reserve will announce their latest interest rate decisions.

Speeches from ECB president Christine Lagarde and Federal Reserve chair Jerome Powell are expected to focus heavily on how the oil shock may influence inflation, economic growth and interest rate policy.

The United States is somewhat more insulated from global energy price shocks because of its large domestic shale oil industry, although petrol prices have already climbed to their highest levels since mid-2024.

The shift in expectations has already begun feeding through into the UK housing market, where lenders are adjusting mortgage pricing in anticipation of higher borrowing costs.

Banks and building societies base mortgage rates on financial market expectations of future interest rate movements, particularly through swap markets.

Several major lenders have already begun raising rates on new home loans.

Nationwide Building Society increased some mortgage products by 0.25 percentage points last week, while HSBC and Coventry Building Society confirmed that similar increases would follow.

Higher mortgage rates could slow activity in the housing market just as it had begun recovering from the turbulence caused by rising borrowing costs in recent years.

The potential impact of sustained energy price increases extends far beyond monetary policy.

Economists warn that higher fuel costs could also drive up food prices, particularly if fertiliser supplies are disrupted by the closure of shipping routes in the Persian Gulf.

If oil and gas prices remain elevated for an extended period, the resulting inflationary pressures could force central banks to maintain tighter financial conditions even as economic growth weakens.

For policymakers at the Bank of England, the challenge is increasingly clear: balancing the need to control inflation while avoiding further damage to an already fragile economy.

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Bank of England may raise interest rates as oil shock from Middle East war drives inflation fears

Oil prices surged to their highest levels in nearly three years as escalating conflict in the Middle East disrupted energy supplies and triggered fears of a major global shock to oil markets.

The global benchmark Brent crude oil briefly climbed to $119.50 a barrel in overnight trading, the first time prices have approached $120 since 2022, before easing back to around $107 after reports that the Group of Seven could release strategic oil reserves to stabilise markets.

The sharp spike came as shipping through the Strait of Hormuz, one of the world’s most important energy corridors, ground to a near halt following escalating military tensions involving Iran, the United States and Israel.

The Strait of Hormuz, a narrow waterway linking the Persian Gulf with the Gulf of Oman, normally carries around 20% of the world’s oil exports. The latest conflict has seen tanker traffic collapse as insurers, shipping companies and crews refuse to risk the route.

According to data from shipping tracker MarineTraffic, only nine commercial vessels passed through the strait last week, compared with a typical daily average of about 50 before hostilities intensified.

Iran’s Islamic Revolutionary Guard Corps has warned that any vessels attempting to pass through the waterway could be targeted, threatening to “set ablaze” ships using the route.

The disruption has forced energy traders and governments to confront the possibility of one of the largest supply shocks since the 1970s oil crises.

Brent crude has already risen more than 50% since the start of 2026, when prices were hovering around $61 a barrel.

The surge accelerated dramatically after several Gulf producers, including Qatar, United Arab Emirates, Kuwait and Iraq, cut production amid the growing conflict.

Analysts at Goldman Sachs warned that prices could climb even higher if tanker flows do not recover quickly.

The bank said Brent crude could surpass the $146 peak reached during the 2008 oil crisis if the strait remains closed for an extended period.

“Our analysis suggests that developments in the Persian Gulf represent one of the most severe disruptions to global energy supply in decades,” Goldman said in a note to investors.

The crisis has already severely impacted production in Iraq, one of the largest oil exporters in the region.

Output from Iraq’s main southern oilfields has reportedly dropped by 70% to about 1.3 million barrels per day, compared with roughly 4.3 million barrels per day before the conflict escalated.

Officials from the state-run Basra Oil Company said exports had effectively stalled because tankers were unable to reach the country’s main terminals.

Storage facilities in southern Iraq have reportedly reached full capacity as crude continues to be pumped but cannot be shipped.

“This is the most serious operational threat Iraq has faced in more than 20 years,” a senior official from the Iraqi oil ministry told Reuters.

Economists warn the energy shock could ripple across the global economy if prices remain elevated.

Analysts at JPMorgan Chase estimate that oil prices stabilising around $120 per barrel could add more than one percentage point to global inflation and reduce economic growth by up to 1.2 percentage points.

The surge has already pushed investors toward safe-haven assets, strengthening the US dollar and triggering volatility in equity markets.

Asian stock markets suffered steep declines earlier in the week as investors reacted to the possibility of prolonged disruption to energy flows.

Industry data suggests hundreds of oil tankers are effectively stranded around the Persian Gulf region as shipowners adopt a “wait-and-see” approach.

Goldman Sachs analysts said many shipping companies were unwilling to risk sending vessels through the Strait of Hormuz while the security situation remains uncertain.

“Most shippers are currently in a wait-and-see mode while physical risks in the strait remain elevated,” the bank said.

The disruption is already significantly larger than the shock caused by Russia’s invasion of Ukraine in 2022, according to early trade flow analysis.

G7 considers emergency oil release

To prevent the crisis spiralling further, finance ministers from the G7 are expected to meet to discuss releasing crude oil from emergency strategic reserves.

Such coordinated releases have previously been used to stabilise markets during supply shocks, including during the early months of the Ukraine war.

However, analysts warn that emergency stockpiles may only provide temporary relief if the shipping disruption continues.

The surge in energy prices has also complicated the outlook for global monetary policy.

Traders have sharply scaled back expectations of interest rate cuts from major central banks, fearing the energy shock could trigger a fresh wave of inflation.

Economists at Deutsche Bank warned that if oil prices remain elevated the Bank of England may cut interest rates only once in 2026.

Chief UK economist Sanjay Raja said inflation in Britain could rise as high as 3.8% if energy costs remain elevated.

In that scenario, he suggested the UK government could be forced to consider fuel duty reductions to offset rising household energy and transport costs.

Some economists believe the crisis could rival some of the most significant oil disruptions in modern history.

Nobel Prize-winning economist Paul Krugman said the situation could potentially exceed previous shocks linked to the 1973 Yom Kippur War and the 1979 Iranian revolution.

“The disruption of world oil supplies caused by the war in Iran looks extremely serious,” Krugman wrote.

“If the Strait of Hormuz remains closed for an extended period, this will be a worse disruption than either of those historic energy crises.”

For now, global markets remain focused on whether tanker traffic can resume through the strait, a development that could quickly bring oil prices down, or whether the conflict will deepen into a prolonged geopolitical and economic shock.

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Strait of Hormuz crisis sends oil price close to $120 as Middle East conflict rattles markets

AI marketing platform Mega has secured $11.5 million in Series A funding to accelerate the rollout of its AI-driven growth engine designed specifically for small and medium-sized businesses.

The Brooklyn-based company aims to replace traditional marketing agencies with a network of autonomous AI agents capable of managing digital growth channels end-to-end. These agents execute and optimise search engine optimisation (SEO), paid advertising, website management and emerging AI search channels, delivering what the company describes as predictable customer acquisition without the overhead and variability associated with agency services.

The funding round was led by Goodwater Capital, with additional participation from Andreessen Horowitz, Atreides Management, SignalFire and Kearny Jackson. The round also attracted a group of high-profile angel investors including WNBA stars Diana Taurasi, Breanna Stewart, Kelsey Plum and Nneka Ogwumike.

Mega’s platform is designed to address what its founders see as a structural problem facing small businesses in the digital economy: the expectation that they compete across complex marketing channels typically optimised for large enterprises.

Most small businesses must manage search marketing, paid advertising, websites and emerging AI-driven discovery platforms simultaneously, yet often lack the budget, time or expertise to do so effectively. Traditional agencies can be expensive and inconsistent, while existing AI tools frequently require significant technical knowledge and manual input.

Mega’s solution delivers marketing execution through software rather than dashboards or toolkits. Once a business signs up, the platform autonomously plans campaigns, executes tasks and continuously optimises performance.

From the customer’s perspective, the system functions like an outsourced growth team that operates automatically.

“We realised early that business owners do not want another AI chat tool that requires hours of prompting,” said Lucas Pellan, co-founder of Mega. “They want customers. So we built a system that actually does the work.”

Mega’s technology relies on a network of specialised AI agents that coordinate marketing activities across multiple digital channels.

The platform currently focuses on four primary areas: SEO, paid advertising, website optimisation and what the company calls GEO (Generative Engine Optimisation), which refers to optimising visibility within AI-driven search and discovery systems.

The system plans campaigns, launches them, tests variations and adjusts strategies based on performance data collected across its entire user base.

According to the company, around 55 per cent of the work performed by the system is fully automated, while 35 per cent is largely automated with human oversight. The remaining 10 per cent is completed manually by specialist operators to ensure quality control and strategic guidance.

This hybrid structure allows the company to scale marketing execution while maintaining reliability and performance standards.

Every campaign executed through the system feeds data back into Mega’s platform, improving the algorithms that generate creative assets, refine targeting, manage bids and optimise conversions.

Mega’s creation emerged from an unexpected origin story.

The founding team was originally building a video game company during the Covid pandemic when the launch of OpenAI’s ChatGPT sparked a series of internal experiments with AI tools to accelerate their own marketing growth.

Using the tools they developed internally, the company’s organic search traffic increased 100-fold while paid customer acquisition costs fell by roughly 80 per cent.

When the founders shared the tools with other entrepreneurs, demand quickly grew.

“We kept hearing the same question from founders: ‘Can we use this too?’,” Pellan said.

This demand prompted the team to pivot away from gaming and develop the platform into a standalone growth product for SMBs.

Mega’s early growth has been rapid. The company reports that it went from zero to $10 million in revenue within ten months of launching its platform.

Customers span a wide range of industries, including home services companies, law firms, healthcare providers, e-commerce brands and software businesses.

In one example cited by the company, a Texas-based medical spa increased its search traffic by 174 times using the platform’s automated SEO tools. A personal injury law firm saw a 243-fold increase in search visibility and began ranking in the top three for key search terms.

Another client, a direct-to-consumer health brand, generated $120,000 in revenue through its website while surpassing its Amazon marketplace performance without increasing advertising spend.

Across its customer base, Mega claims the platform helps businesses grow around 20 per cent faster on average.

For many clients, the appeal lies in removing the complexity of managing digital marketing tools and agencies.

Darin Chase, a home services business owner using the platform, said: “Since working with Mega we are finally getting a predictable lead flow. We are also able to divert our time away from Facebook marketing to other important projects because Mega manages everything.”

Mega is targeting the vast SMB marketing sector across North America, where tens of thousands of agencies serve millions of small businesses.

Despite the size of the market, many SMBs continue to struggle with inconsistent marketing performance, unpredictable customer acquisition costs and limited visibility into which strategies actually generate revenue.

As digital advertising becomes increasingly competitive and search ecosystems shift toward AI-driven discovery, many smaller businesses are finding it harder to compete with enterprise-level marketing operations.

Investors believe Mega’s approach represents a major shift in how growth services can be delivered.

“Mega represents a fundamental shift in how SMBs should think about marketing, from paying for effort to paying for measurable, repeatable growth,” said Vivek Subramanian, partner and chief product officer at Goodwater Capital.

With the new funding secured, Mega plans to expand its platform beyond its current capabilities.

Future development will include AI-driven management of email marketing, outbound sales campaigns, organic social media growth, lead qualification and sales operations.

The company’s long-term vision is to create a fully automated revenue-generation infrastructure that allows small and mid-sized businesses to access enterprise-level marketing capabilities without enterprise-level costs.

The platform could eventually act as a unified growth system that manages the entire customer acquisition pipeline for SMBs.

If successful, Mega believes its model could fundamentally reshape how smaller companies approach marketing in the AI era.

By replacing manual marketing workflows with automated systems capable of continuous optimisation, the company aims to give smaller businesses the ability to compete with much larger organisations in increasingly competitive digital markets.

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Mega raises $11.5M to replace marketing agencies with AI-powered growth engine for SMBs

A Scottish life sciences start-up developing technology to improve cancer diagnostics has secured £1.58 million in fresh funding as it launches its first commercial product in the United States.

BIOCAPTIVA, a spin-out from University of Edinburgh, is aiming to tackle one of the most persistent technical bottlenecks in the rapidly growing liquid biopsy sector: the preparation of blood samples for genetic testing.

The company’s newly launched msX technology uses magnetic bead extraction to isolate cell-free DNA directly from whole blood, eliminating several complex steps normally required in sample preparation. The approach could significantly accelerate cancer research and diagnostic testing by making the process faster, more scalable and easier to automate.

The latest investment round was led by Archangels and supported by existing investors including Old College Capital, BBI Solutions and Scottish Enterprise, alongside new investor EverQuest Capital Partners.

Liquid biopsy, a technique that analyses genetic material from blood samples rather than tumour tissue, has become one of the most promising developments in cancer diagnostics in recent years. It enables clinicians and researchers to detect cancer-related genetic changes through simple blood tests, reducing the need for invasive surgical biopsies.

However, preparing blood samples to isolate usable genetic material remains a complex and time-consuming process. Traditional methods typically require centrifugation equipment, multiple reagents and extensive laboratory handling, all of which slow down analysis and increase costs.

BIOCAPTIVA’s patented msX platform aims to simplify this process. By using specialised magnetic beads, the system captures cell-free DNA directly from whole blood samples without the need for centrifuges or additional reagents.

The result is higher-quality DNA extraction with faster processing times and fewer technical steps, improvements that could allow laboratories to process larger volumes of samples more efficiently.

Chief executive Jeremy Wheeler said the technology addresses a long-standing gap in cancer research workflows.

“Scientists and technologists are doing remarkable work with the samples they receive, but the preparation stage hasn’t evolved significantly for years,” he said.

“Our msX platform has the potential to revolutionise how samples are collected and processed, enabling larger sample volumes, faster extraction and fully automatable workflows.”

The company has already begun commercialising the technology internationally, launching its msX bead kits for research use in Boston earlier this month.

The move reflects BIOCAPTIVA’s strategy to build early validation and research partnerships in the United States, one of the world’s largest markets for oncology diagnostics and biotechnology innovation.

By placing the technology in the hands of research laboratories, the company hopes to generate evidence across multiple applications in cancer detection, genetic testing and clinical diagnostics.

The liquid biopsy market itself is expected to grow rapidly over the coming decade as non-invasive diagnostic methods become increasingly important in personalised medicine.

Industry analysts estimate that global demand for liquid biopsy technologies could reach tens of billions of dollars annually as healthcare systems adopt earlier cancer detection and monitoring techniques.

Alongside the funding announcement, BIOCAPTIVA also confirmed the appointment of Alan Schafer as chief technology officer.

Schafer brings more than three decades of experience in genetics technologies and molecular diagnostics. His career includes senior leadership roles across several high-profile biotech companies.

He previously served as CTO of Inivata, which was acquired by NeoGenomics in 2021 for $415 million.

His earlier roles include chief executive positions at Population Genetics Technologies and 14M Genomics, as well as serving as global vice-president of technology development at GlaxoSmithKline.

The company believes Schafer’s experience in scaling diagnostics technologies will help accelerate the commercialisation of its platform.

The £1.58 million investment will primarily be used to expand research and development and broaden BIOCAPTIVA’s product portfolio.

Future applications for the technology could extend beyond cancer diagnostics into other areas of genetic testing and molecular medicine.

Sarah Hardy, head of new investment at Archangels, said the company was entering a critical stage in its development.

“BIOCAPTIVA is reaching an inflection point with the launch of its msX beads,” she said.

“The technology has remarkable market potential, and the business now has the leadership team, research capability and commercial strategy needed to scale.”

The investment also reflects continued momentum in Scotland’s life sciences sector, which has become an important driver of economic growth and high-value employment.

Derek Shaw, director of entrepreneurship and investment at Scottish Enterprise, said the agency’s support for BIOCAPTIVA demonstrates a broader commitment to scaling innovative companies emerging from Scottish universities.

“Our investment highlights our focus on increasing capital investment in Scotland’s businesses,” he said.

“Supporting companies like BIOCAPTIVA helps drive productivity, expand exports and create higher-value jobs across the economy.”

As BIOCAPTIVA expands its research partnerships and product development pipeline, the company hopes its technology will help accelerate advances in cancer detection and treatment.

For Wheeler, the long-term ambition is clear.

“In practice, this technology means faster, deeper research on cancer and potentially better outcomes for millions of patients worldwide,” he said.

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BIOCAPTIVA raises £1.58m to transform liquid biopsy sample preparation