The Middle East war began on February 28 and has been ongoing for about two weeks with no end in sight, according to multiple reports. This conflict is causing financial pressure on UK households, affecting mortgages, fuel, and energy bills, multiple sources indicate. Average new five-year fixed rate mortgages have hit a near 12-month high of 5.19%, up from 4.95% just before the conflict, according to industry experts Moneyfacts. The number of fixed mortgage deals on offer has crashed by 530 since the conflict began, multiple reports confirm.
Petrol and diesel costs have soared since the US and Israel launched strikes on Iran, according to multiple reports. The average price of petrol is up 25p a litre since the start of the war, while diesel has risen by 48p, both at their most expensive level in over three years, multiple sources state. Jet fuel prices hit an all-time high of $1,838 (£1,387) per tonne, compared with $831 before the war began, multiple reports indicate. Airlines like Air New Zealand, Delta, and Air France-KLM are cutting flights and raising fares in response to fuel costs, according to multiple sources.
Cornwall Insight predicts the typical household energy bill will rise by £288 a year (18%) compared with the April price cap. Homeowners in Britain may pay more for double glazed windows and doors due to the war, with uPVC window and door prices already around 8% higher, according to Antony Heath, development director of Glevum Windows. European wholesale gas prices rocketed 35% after attacks on energy facilities in the Middle East, multiple reports indicate. Households could face a £500 surge in energy bills according to the Resolution Foundation, or up to £300 higher for at least the next year according to EDF, the think tank and energy giant reported.
Oil prices have risen above $100 a barrel due to attacks on oil and gas facilities and the closure of the Strait of Hormuz. Brent crude oil prices rose more than 5% to $109 a barrel at one stage and are 50% up in the month to date, according to multiple reports. Oil prices have surpassed $100 per barrel for the first time since 2022, research indicates. US West Texas Intermediate (WTI) crude blew past the $100 per barrel threshold, research shows. The price surge is driven by escalating military tensions in the Middle East, particularly confrontations between the US, Israel, and Iran, research confirms. Attacks by the Iranian military targeting energy facilities and US interests in the region are contributing to tensions, research adds.
Concerns about potential disruptions to oil supplies from the Arabian Gulf are pushing prices higher, according to energy market analysts. Markets are alarmed by possible disruptions in the Strait of Hormuz, through which roughly 15 million barrels of crude (about 20% of the world's oil) are shipped daily, research indicates. Pakistan fuel owners warn of a national shutdown amid the oil crisis, research shows. Bangladesh is experiencing a worsening fuel shortage, with hours-long queues for just a few liters in Dhaka, research confirms. Russia will ban gasoline exports by local producers from April 1 to July 31 to stabilize domestic fuel prices, research states. The US oil rig count is down for the week ending March 27, with a fall of 75 rigs compared to one year ago, research indicates. Most of Iraq's oil activities and projects are halted due to war conditions, according to an official.
The war could lead to a spike in inflation, affecting next year's state pension increase under the triple lock policy, according to Antonia Medlicott, founder of Investing Insiders. The Bank of England warned a prolonged energy shock could trigger an inflationary spike that may pave the way for interest rate hikes. The Federal Reserve raised its forecast for inflation due to the war-linked surge in global energy prices. The British Chambers of Commerce forecast that inflation would remain 'firmly above' the Bank of England’s 2% target. Chancellor Rachel Reeves acknowledged the war is likely to cause economic damage and put upward pressure on inflation. The Bank of England now expects inflation to rise to 3.5% and stay above target throughout 2026.
Half of UK households (an estimated 14 million) are struggling to afford everyday essentials and making adjustments like dipping into savings, according to the Which? consumer insight tracker. Confidence in the future of the UK economy plummeted by 13 points to a score of -56, the lowest level since the end of 2022, the Which? tracker reports. UK businesses reported the war has had an adverse impact on customer demand, input prices, and supply chains in March, with the biggest monthly rise in costs since 1992 according to the S&P Global Purchasing Managers' Index, research indicates.
The UK government has described Britain's fuel supplies as 'resilient'. Prime Minister Keir Starmer condemned Iranian strikes on Qatari gas facilities and held an emergency Cobra meeting. The Royal Navy is preparing HMS Dragon for deployment to the eastern Mediterranean to bolster defences, according to Defence Secretary John Healey.
The oil market remains fragile despite the start of strategic reserve shipments, with the Strait of Hormuz effectively closed since early March, research indicates. Oil prices hold gains as Middle East tensions outweigh de-escalation hopes, with markets volatile, research shows. The price of Brent crude oil rose back above $100 a barrel as the direction of the US-Israel war in Iran remained unclear, research confirms. Global energy markets have seen volatile trading since the US and Israel attacked Iran on 28 February, research states. Oil and gas prices have soared as Iran responded by effectively blocking the Strait of Hormuz, through which about 20% of the world's oil and liquefied natural gas pass daily, research indicates. Fears that the conflict was escalating over the weekend helped send Brent to $113 a barrel, research shows. Oil prices dropped back on Monday after Trump said the US would postpone strikes against Iranian energy infrastructure for five days, citing constructive talks, research confirms. By Tuesday, doubts about those discussions sent the price back up to more than $103, research states.
Diplomatic developments show contradictions, with the White House saying President Trump favors a peaceful resolution with Iran but is prepared to escalate sharply if Tehran fails to accept the 'reality of the current moment'. Tehran has rejected claims that it had been in contact with the US, calling them an attempt to manipulate energy prices and stock markets. This disagreement suggests uncertainty about whether diplomatic efforts are underway, which could affect market stability and conflict resolution prospects.
Global economic and policy adjustments are underway, with the US temporarily waiving sanctions on Russian oil and easing sanctions on Iranian oil already at sea, research indicates. China dialled back on planned fuel price hikes to reduce the burden on drivers as energy costs surge due to the Iran war, research shows. Stock markets have been mixed amid reports that the US was preparing to deploy soldiers to the Middle East, research confirms. In the US, all three major indexes slumped, with the S&P 500 ending down almost 0.4%, research states. In Europe, London's FTSE 100 closed up 0.72%, Germany's Dax ended marginally lower, and France's Cac finished 0.23% ahead, research indicates.
A two-week ceasefire has brought some relief, but there is uncertainty about what could happen next, according to multiple reports. The exact timeline for when the conflict might end remains unclear, given these conflicting reports on ceasefire and duration.
Reactions from businesses and industry experts highlight broader impacts, with the price of pints potentially getting higher due to rising oil and gas costs affecting pubs and breweries, according to Molly Monks, insolvency expert at Parker Walsh. Bottled water is expected to become more expensive in the US due to higher plastic production costs from oil price surges, according to Patrick Penfield, professor at Syracuse University. Libya signed an energy deal with US oil giant Chevron for offshore exploration, research shows.
Implications for future economic stability include US crude oil inventories being up by 1.5% for the week ending, research indicates. The specific impact on UK energy bills varies, with different organizations providing estimates ranging from £288 to £500 annually, and the extent of global fuel shortages and which regions will be most affected next is not fully known. The current status of oil prices is also uncertain, as sources report different figures ranging from $100 to $113 per barrel, and whether the Strait of Hormuz is fully closed or just partially blocked, and for how long, remains unclear.