The Bank of England urges to be prepared for more volatile periods in the financial markets.

The Bank of England warned on Wednesday that investors and other participants in the financial markets should be prepared for more severe volatility related to the conflict in the Middle East. The Bank's Financial Policy Committee stated in a declaration that the conflict has heightened concerns about government bonds, private credit markets, and U.S. technology companies focused on artificial intelligence. The Bank of England stated, "The escalation of uncertainty and unpredictability has made it more difficult for markets to reflect economic fundamentals, increasing the likelihood and magnitude of sharp market fluctuations due to new information." "The ultimate impact on financial stability will depend on the duration, scale, and effects of the conflict, including whether any additional shocks occur simultaneously." The Bank of England warned that a minority of hedge funds in these markets are using "relatively high" leverage, increasing the risk of "disorderly unwinding of positions leading to a sudden drying up of liquidity." The Bank pointed out that hedge funds investing in UK government bonds have reduced their borrowing by 21% since the start of the conflict, but leverage levels "remain elevated by historical standards."