Brits face intensified financial pressures amid the ongoing Middle East conflict. US and Israeli strikes on Iran resulted in the death of Ayatollah Ali Khamenei, prompting Iranian retaliatory attacks on neighboring oil-rich Gulf states. These events have already disrupted global oil and gas markets, with ripple effects poised to impact everyday costs from energy bills to mortgages and travel over the coming weeks and months.
Energy Bills Set to Surge
Recent escalations threaten even steeper increases in household energy costs. The region supplies a significant share of liquefied natural gas (LNG) to the UK. Conflict-related disruptions hinder LNG production and seaborne transport, driving up prices.
The Strait of Hormuz, a critical chokepoint off Iran’s coast, poses the greatest threat. Tankers risk attacks there, forcing shipping firms to reroute around Africa. This detour adds substantial time and expense.
Analysts project that a six-week closure of the Strait would triple wholesale gas prices, pushing the UK energy price cap from just over £1,600 to around £2,500. Prolonged shutdowns would amplify the damage further. The Strait handles about 20% of global oil trade, with over 20 million barrels daily in 2025 valued at more than £450 billion, per US Energy Information Administration data.
Petrol Prices Climb Sharply
Brent crude oil prices have jumped 13% since the conflict began, reaching approximately £82 per barrel. This spike prompted panic buying, with queues forming at UK petrol stations. Although prices have eased slightly, further instability could reverse the trend.
Projections indicate Brent could exceed £100 per barrel, lifting petrol to £1.55 per liter and diesel to £1.62 per liter. An average fill-up would then exceed £90.
Inflation Pressures and Mortgage Strain
Rising oil and gas costs will inflate prices across sectors, from groceries to delivery services. The Bank of England aims to reduce inflation from 3% to 2%, but upward pressures may prompt it to hold or hike interest rates.
Fixed-rate mortgage holders remain protected until renewal, but tracker and variable-rate borrowers face immediate hikes. First-time buyers could borrow less and pay more monthly.
Market Volatility Emerges
The FTSE 100 has dipped slightly amid the turmoil. Investors flock to safe havens like gold and war-related sectors such as defense stocks, boosting their values. Experts urge holders of diversified hedge funds or ISAs to avoid panic selling.
Travel Costs Escalate
Fuel price hikes will raise jet fuel expenses, which airlines pass to passengers. Closed airspace over Iran and surrounding areas complicates flight paths, compounding strains from the Ukraine conflict.
