How the Iran War Influences Your Money and Bills
Petrol Costs on the Rise
The escalating tensions between the US and Iran have already begun affecting the UK’s economy, with noticeable impacts on fuel expenses. Crude oil prices have surged since the conflict started, though they remain unpredictable due to shifts in the war’s progress and White House statements. As of 13 April, the average petrol price reached 158.27p per litre, up by over 25p compared to the beginning of the crisis. Diesel prices have climbed to 191.5p a litre, reflecting nearly 49p in increases since March. This means the typical cost of filling a 55-litre family car with petrol has risen by £14, while diesel expenses have jumped by £27.
“Petrol prices are highly volatile, with future reductions hinging on the outcome of peace negotiations,” said Simon Williams, RAC’s head of policy.
Drivers have reported higher costs at the pump, though some warn that price drops may take time even if oil shipments resume through the Strait of Hormuz. While fuel supplies are said to be adequate, organisations are advising people to cut back on unnecessary travel and adjust their driving habits to save energy. For instance, avoiding abrupt acceleration or braking can help conserve fuel.
Mortgage Rates Under Pressure
The war has also disrupted mortgage markets, reversing earlier expectations of declining rates. Lenders have swiftly raised borrowing costs as their funding expenses increase and they anticipate the base rate remaining stable. Between March and now, the average two-year fixed mortgage rate has climbed from 4.83% to 5.89%, according to Moneyfacts. Cheapest deals have seen the most significant hikes, with five-year rates rising from 4.95% to 5.77% over the same timeframe.
During periods of economic uncertainty, banks often reduce mortgage options, limiting consumer choices. Moneyfacts reports there are now around 1,500 fewer residential mortgage products available, despite over 6,000 deals still being on offer. This shift underscores the broader financial strain caused by the conflict.
Energy Bills and Uncertain Futures
Although energy bills are shielded by Ofgem’s price cap in England, Wales, and Scotland, this protection is temporary. The cap, which limits unit costs for variable deals, remains active until July. Notably, prices dropped in early April, but the coming months will determine whether this trend continues or if costs spike again on the wholesale energy market.
Energy consultancy Cornwall Insight forecasts that, under the July to September price cap, a dual-fuel household using standard amounts of gas and electricity could face annual bills of £1,861—a rise from the current £1,641. However, this projection is contingent on market conditions. If a ceasefire holds, it may ease the peak price surge, but the full extent of the conflict’s impact on energy costs remains unclear.
As oil prices fluctuate, their influence extends beyond fuel. Higher transport costs for supermarkets could drive up food prices, creating a ripple effect across everyday expenses. This highlights how the war’s economic consequences may linger long after the conflict itself subsides.
