How the Iran war affects your money and bills
Impact of the Iran Conflict on Financial Matters
The ongoing conflict between the US and Iran has already begun influencing the financial landscape for UK residents. US President Donald Trump declared a ceasefire last week, yet talks between the nations failed to reach an agreement, prompting worries that the economic repercussions of the war could persist for a while. A research group estimates that the typical working-age household in Britain might face a significant financial burden this year due to the conflict.
Fuel Prices and Driver Concerns
Gasoline costs have risen sharply since the conflict began, affecting motorists across the UK. The RAC reports that the average petrol price reached 158.27p per litre on 13 April, marking an over 25p increase from earlier in the war. Diesel prices have also surged, hitting 191.5p a litre—an almost 49p climb since March. These changes mean that filling a 55-litre family car with petrol now costs £14 more than at the start of the conflict, while diesel has risen by £27.
“The situation remains highly unstable, with outcomes hinging on developments in the Strait of Hormuz,” said Simon Williams, RAC’s policy head.
Economic Ripple Effects and Retail Disputes
Analysts note that every $10 increase in oil prices leads to roughly 7p per litre rise at the pump. Although supply levels are stable, petrol retailers are urging drivers to cut back on non-essential trips and adjust their driving habits to save fuel. Earlier in March, tensions arose between retailers and the government over claims that oil price spikes were being exploited for profit.
Mortgage Rates and Lending Conditions
The war has disrupted expectations for falling interest rates on mortgages. Previously, new fixed-rate deals were anticipated to decrease, but lenders have now raised rates rapidly. According to Moneyfacts, the average two-year fixed rate has climbed from 4.83% to 5.89% since March. For five-year deals, the average rate has increased from 4.95% to 5.77%. Economic uncertainty has also led to a reduction in mortgage options, with about 1,500 fewer residential deals available, though over 6,000 remain on the market.
Energy Bills and Price Caps
Energy costs have also been affected. A price cap introduced by Ofgem in England, Wales, and Scotland limits variable energy bills, but this protection is temporary, ending in July. While prices dipped in early April, future fluctuations on the wholesale market will determine summer bills. Cornwall Insight forecasts that, under the current cap, a typical dual-fuel household could spend £1,861 annually on energy, up from £1,641 now. A lasting ceasefire might ease this burden, but the outlook remains uncertain.
As the conflict continues, its financial impact is expected to spread beyond fuel and mortgages. Higher oil prices could influence the cost of everyday goods, including groceries. The government previously intervened with the Energy Price Guarantee during the pandemic and the Ukraine invasion, and similar measures may be needed again.
