The Resolution Foundation’s warning that defence spending cannot rise without tax rises landed at an uncomfortable moment for Andy Burnham, who faces his first PMQs today. The Foundation’s position is essentially that the fiscal arithmetic doesn’t work otherwise — and with the day-to-day spending budget already set to fall in real terms next year, and the capital budget declining every year to the end of the decade, there is very little room to manoeuvre without going back to the revenue side.

Bond markets are having a rough morning and the Iran situation is the proximate cause. US 10-year yields have hit their highest since 2023, European gas is at a three-year high, and oil is up. The trigger was a fresh exchange of strikes between Washington and Tehran — US airstrikes hit what Iranian state media says was a wedding in southern Iran, killing four people including two children. Iran has responded with attacks on US bases in the region. The FT and others are treating this as a meaningful escalation rather than a contained skirmish, and the Pentagon situation is not helping confidence: Army Secretary Driscoll has quit in a clash with Hegseth, with the FT reporting serious leadership gaps at a moment when the US military is managing an active conflict.

Separately, leaked documents reported by the FT reveal Russia has been secretly helping Iran develop supersonic cruise missiles — described as one of the most significant known military technology transfers from Moscow to Tehran. The timing, with US-Iran hostilities already flaring, makes this considerably more than a background story.

On European bonds, the Economist flags that yields are rising for reasons that differ somewhat from the US dynamic but are no less problematic. The energy price surge is feeding into the picture, and with European gas at a three-year high, the inflation calculus for the ECB gets more complicated just as markets had started to price in a relatively benign path.

On China and technology, the FT has a piece worth noting: the argument is that China’s genuine competitive threat in robotics is not the humanoid showcase products but its ability to scale supply chains for the underlying components. The implication for anyone thinking about industrial automation exposure is that the moat around Western robotics firms may be narrower than the headline valuations suggest.

Zelensky has called on airlines to stop using Russian airspace as Ukraine escalates drone operations. Chinese and Gulf carriers are among those still routing through Russia. If that pressure translates into actual rerouting, it adds cost and complexity for carriers already navigating elevated fuel prices.

PMQs begins at noon today. Given the defence spending and fiscal debate, Burnham’s answers on tax will be closely watched.

Sources

Guardian, BBC News, The Economist, Al Jazeera, FT, Politico, TechCrunch, Ars Technica — 2026-09-02