The UK government has borrowed £4 billion at a record-high interest rate of 5.82% for a 30-year bond, the highest rate since 1998. This comes as global bond markets have experienced a sell-off, pushing up borrowing costs for governments around the world. The Debt Management Office, which handles the UK’s government borrowing, was created in 1998, and this rate marks the highest it has seen since then. Chancellor John Healey has stressed his commitment to reducing the national deficit and balancing the budget, as he spoke on Monday about the need for fiscal responsibility. The increase in borrowing costs has been driven by fears of rising inflation, partly due to the renewed conflict in the Middle East, which has caused oil prices to climb. Higher oil prices can lead to increased costs for goods and services, pushing inflation upward. Investors are also concerned about the UK’s growing public debt, which could become more expensive to service as interest rates rise. The Office for Budget Responsibility, an independent body that provides economic forecasts, is expected to update its projections before the budget on 28 October. These forecasts are likely to show that rising interest rates will significantly reduce the budget flexibility that was previously set aside. Bank of England Governor Andrew Bailey warned that rising oil prices are increasing inflationary pressures and could lead to higher interest rates. Speaking to MPs, he said the risks to inflation are on the higher side, primarily due to energy price increases. While he denied any secret plans to raise interest rates, he noted that borrowing costs have already risen for consumers. Mortgage rates in the UK are now about 0.75% higher than they were when the Middle East conflict began, which Bailey called the largest increase in G7 countries, aside from Japan. Brent crude oil, a key benchmark for global oil prices, was trading at around $97 a barrel on Tuesday. Bailey suggested that prices could rise further, given the closure of the Strait of Hormuz to tanker traffic and attacks on Russian refineries by Ukraine. During a meeting with the Treasury select committee, Bailey was joined by other members of the Bank’s monetary policy committee, who will meet next week to decide on interest rate changes. Megan Greene, who previously voted in favor of a rate increase in July, expressed concern about acting too late to curb inflation. However, Dave Ramsden and Alan Taylor, who opposed the rate rise, argued that the impact of the Iran conflict on inflation may have been less severe than expected.