UK 10-year gilt yields fell to 4.85%, their lowest level since April 20, outperforming European peers as markets reopened after the Bank Holiday weekend and processed fresh Middle East developments. Iran reported explosions in the southern port city of Bandar Abbas, while Washington confirmed it conducted "self-defense" strikes targeting Iranian missile launch sites and vessels attempting to deploy naval mines. This follows US President Donald Trump's statement that a memorandum of understanding between the two nations had been "largely negotiated." Meanwhile, recent data revealed contractions in UK private sector activity during May, alongside cooling inflation and a softer labor market, prompting investors to scale back Bank of England rate hike expectations. Market focus now shifts to upcoming speeches from BoE policymakers for monetary policy signals, as well as political developments surrounding Prime Minister Keir Starmer following Labour’s regional election setbacks this month.