How the Iran war affects your money and bills
How the Iran Conflict Impacts UK Finances
Energy Costs and the Road Ahead
The ongoing US-Israel conflict with Iran has already influenced household expenses in the UK, particularly in energy and transport. As of 13 April, the average petrol price stood at 158.27p per litre, according to RAC data, marking a rise of over 25p since the conflict began. Diesel prices have surged to 191.5p per litre, an increase of nearly 49p compared to March. These hikes mean a family car’s fuel cost has climbed by £14 for petrol and £27 for diesel since the war started.
RAC’s head of policy, Simon Williams, noted that pump price increases are slowing, but reductions will hinge on peace talks. “It’s a highly volatile situation with much depending on what happens with the Strait of Hormuz,” he added. Despite recent price dips in April, the upcoming months will determine whether energy costs remain elevated, as the wholesale market’s trends shape bills from summer onwards.
Mortgage Rates and Economic Uncertainty
Financial markets have also felt the strain. New fixed mortgage rates, once expected to decline, are now rising. The average two-year fixed rate has climbed from 4.83% in March to 5.89% currently, while five-year deals have increased from 4.95% to 5.77% over the same period. Lenders are attributing this shift to higher funding costs and concerns about the base borrowing rate stabilizing rather than falling.
Analysts warn that economic instability could lead to reduced mortgage options. Moneyfacts reported a drop of around 1,500 residential mortgage products available, though over 6,000 deals remain on the market. This scarcity underscores the ripple effects of global conflicts on domestic financial products.
Broader Implications for Goods and Services
Even non-motorists may feel the impact. When petrol prices climb, transport costs for businesses rise, often passing through to consumer prices. For instance, increased fuel expenses could drive up food costs for supermarkets. The conflict has disrupted supply chains and heightened inflationary pressures, affecting a wide range of goods and services.
Before the war, there was optimism about steady declines in interest rates. Now, that trend has reversed, with lenders adjusting rates in response to global economic shifts. The Energy Price Guarantee, introduced after previous crises like the pandemic and Ukraine invasion, may be needed again if prices continue to climb.
Looking to the Future
While the situation remains fluid, the stakes are clear. A ceasefire could ease some pressures, but the current trajectory suggests lasting financial strain for many. As the conflict evolves, its effects on daily expenses—from fuel to housing—will continue to shape budgets across the UK.