UK gilt yields head for biggest one-week fall since 2023

* UK 10-30-year gilt yields fall 30 bps in a week

* Drop is ​from highs touched ⁠last week

* UK borrowing costs have risen most in ​G7

* Eyes on Labour Party turmoil as well as Iran war (Recasts, adds analysts and details throughout)

LONDON, May 22 (Reuters) - Britain's lofty government bond yields headed on ​Friday ‌for their biggest one-week fall since 2023 after weak economic data and an easing of concern among investors about the prospect of a leftward shift in ⁠the country's political leadership.

After rising by the most among Group of Seven nation ⁠since the start of the Iran war and hitting ​their highest levels in decades last week on worries about domestic politics, yields on 10-, 20- and 30-year gilts were down by almost 30 basis points from their levels of last Friday.

That represented the biggest one-week drop since December 2023 and was roughly three times the fall ​over the ‌past week in equivalent German bund yields.

On the day, gilt yields were down between 3 and 8 basis points across the maturity range.

Much of the fall came after UK April inflation data came in at aweaker than expected2.8% on Wednesday and after other economic indicators suggested Britain's economy is feeling the strain from the fallout from the Iran war.

But analysts warned that the inflation relief might prove short-lived.

Christoph Schon, ​lead principal for investment decision research with SimCorp, said price pressures were likely to feed through into headline inflation quickly in the coming ‌months.

"There is lots of potential for disappointment," Schon said.

Investors will also probably remain on edge about the possibility of a new British government led by the current mayor of Manchester, Andy Burnham, ‌who is considered the most serious challenger to Prime Minister Keir Starmer.

Mark Dowding, chief investment officer at RBC's BlueBay Asset Management, said assurances from Burnham - who is considered to be on the leftside of the governing Labour Party - that he would stick with the fiscal ​rules of Starmer's government had been welcomed by investors.

But "he remains committed to raising taxes and spending in a material way and we are very sceptical that this ‌will go smoothly, if he does end up in 10 Downing Street later this summer," Dowding wrote in a note for clients.

Schon at SimCorp said investors seemed to be stepping back from automatically assuming that Burnham would be the next prime minister given the challenge he is likely ⁠to face ⁠in getting elected to parliament in a by-election in June and the likelihood of a months-long ‌Labour leadership contest.

"There are still lots of ifs around what the market has been attached to," he said.

Luke Hickmore, fixed income investment director at fund management firm Aberdeen, ​said the next lurch in ​borrowing costs could be another jump upwards and there was a chance that the yield on ‌10-year gilts could hit 6%, up from under 5% now.

"The gilt market is pricing a risk premium not seen since before the financial crisis," Hickmore said. "The question is whether or not a Starmer successor, competing for party members and trade unions rather than bond markets, will stabilise the situation." (Writing by William Schomberg; Editing by Sharon Singleton, Andy Bruce and Susan Fenton)