The FTSE 100 spent another session lurching between gains and losses after fresh US attacks on Iran, but for Britain’s small business owners the more troubling number sits in the bond market, where gilt yields remain stuck above 4.9 per cent, their highest level since 10 June.

“The shock at the resumption of attacks in the Middle East has started to ease off, but investors are skittish, with early gains evaporating on the FTSE 100,” said Susannah Streeter, chief investment strategist at Hargreaves Lansdown. The blue-chip index clawed back ground in early trade before sentiment turned wary again.

Investors are weighing the likely outcome of the latest round of military action, with both Iran and the US hitting targets in the region. President Trump has declared the ceasefire to be over, yet he has already been heard on Air Force One musing about the prospect of a deal and whether he is inclined to talk to Iran.

“It already seems that a door may be opening to fresh negotiations, even though both sides continue to talk tough,” Streeter said.

There is some relief on the cost front. Brent crude has retreated to around $77 a barrel, down from above $80 yesterday, taking a little heat out of the fuel and freight bills that hit small firms hardest. Mining stocks rebounded, with gold and silver producers gaining as easing oil prices soothed inflation worries and nudged the dollar lower, making dollar-priced commodities more attractive to international buyers.

But nobody in the market is treating the pullback as a turning point. For owner-managers, the risk is that the calm proves temporary and energy costs surge again just as budgets for the second half of the year are being set.

“If energy prices start climbing again, higher costs would rapidly ripple through businesses across multiple sectors, while pricier fuel would eat into household budgets and encourage more cautious consumer spending,” Streeter warned.

That would be an unwelcome echo of the spring, when the oil shock from the Middle East conflict briefly had markets betting on an interest rate rise rather than cuts. With CPI inflation at 2.8 per cent in the year to May and the Bank of England holding Bank Rate at 3.75 per cent, any fresh energy spike would make cheaper borrowing harder to deliver.

The geopolitics is only half the story. Gilt yields, which feed through to the swap rates underpinning business loans, commercial mortgages and asset finance, are also being propped up by turbulence closer to home. Investors are weighing what a Burnham premiership could mean for tax and spending plans, an uncertainty that Business Matters research suggests is already unsettling the vast majority of SME owners.

“With so many moving parts, investors are demanding a bigger premium to lend to the UK, and gilt yields look set to remain sensitive to every fresh political and geopolitical twist,” Streeter said.

For small firms, the practical message is unglamorous but clear. Cheaper oil is welcome, but with borrowing costs pinned near recent highs and the political weather changeable at home and abroad, this is a moment for stress-testing cash flow rather than banking on calmer markets.