A top Bank of England official has warned that global markets could fall even further with current share prices not reflecting the economic risks at play. Sarah Breeden, the Bank’s deputy governor for financial stability, said: “There’s a lot of risk out there and yet asset prices are at all-time highs. “We expect there will be an adjustment at some point.” Markets have been rocked following the war in the Middle East, falling over eight per cent in the space of a month.
The losses saw the FTSE 100 slip under the 10,000 milestone for a brief few trading sessions. But Breeden told the BBC the current share prices have not reached the basement floor when considering the scale of economic pressures still hampering markets. Investor sentiment has been sensitive to headline shocks throughout the conflict, though in the last few months the return of Donald Trump’s TACO (Trump Always Chickens Out) agenda has managed to cool markets from major losses.
The Bank of England has also been vocal in sounding alarm on the “stretched equities” in the US triggered by the ballooning AI bubble. At the end of 2025, the Bank’s Financial Policy Committee (FPC), which Breeden sits on along with governor Andrew Bailey, warned a crash in the roaring value of US tech giants could spark trouble overseas. The group said the current state was “comparable to the peak” of the dot com bubble, which began in 1995 and burst five years later, triggering steep losses for investors.
Clashing risks keep Bank rate-setter ‘awake at night’ Breeden said that the combination of multiple risks imploding at once was what keeps her “awake at night”. “A major macroeconomic shock, confidence in private credit goes, AI and other risky valuations readjust – what happens in that environment and are we prepared for it?” The FPC warned earlier this year that US and Iran war was “likely to interact with vulnerabilities” in the UK economy. “The financial system has been resilient so far.
However, the shock will weigh on growth, increase inflation and tighten financial conditions,” the Bank said. Rising tensions across the Gulf have come when “global risks were already elevated,” the Bank said. As a result of this, the committee said around 1.3m more UK households would face a jump in their mortgage costs following the outbreak of war.
This week, fresh data from the Office for National Statistics revealed inflation surged to 3.3 per cent in March, up from three per cent in February, driven by soaring fuel prices. Motor fuel inflation was up 8.7 per cent – the largest increase since June 2022, shortly after the Russian invasion of Ukraine.