How the Iran war affects your money and bills
How the Iran War Influences Your Finances
Fuel Costs and Market Volatility
The ongoing US-Israel conflict with Iran has already begun to ripple through the UK’s financial sectors, impacting everything from fuel expenses to mortgage rates. While President Trump declared a ceasefire last week, ongoing talks between the nations have not yet yielded an agreement, leaving concerns that the economic fallout could persist for months.
Pump prices have climbed sharply since the conflict began, though they remain sensitive to changes in the war’s status and White House commentary. As of 13 April, the average petrol cost reached 158.27p per litre, a rise of over 25p since the war’s start. Diesel prices have surged to 191.5p per litre, up nearly 49p since early March. This has led to a £14 increase in petrol for a 55-litre family car and a £27 rise for diesel.
“The situation remains highly volatile, with price trends largely dependent on developments in the Strait of Hormuz,” said Simon Williams, RAC’s head of policy.
Industry Tensions and Fuel Advice
Rising fuel costs sparked a dispute in March between petrol retailers and the government, with businesses accusing authorities of using “inflammatory language” to suggest they were profiting from the price spike. Analysts note that a $10 increase in oil prices typically raises pump prices by about 7p per litre. Even if oil shipments resume through the Strait of Hormuz, drivers may need to wait before seeing any relief, as motoring groups urge minimizing non-essential travel and adjusting driving habits to save fuel.
Mortgage Rates and Market Choices
Financial markets have also felt the strain. Lenders have quickly raised mortgage rates, driven by increased funding costs and revised expectations for base borrowing rates. The average two-year fixed rate has risen from 4.83% in March to 5.89% currently, with five-year deals increasing from 4.95% to 5.77% over the same period. During economic uncertainty, lenders often pull products from the market, reducing the number of options available by around 1,500, though over 6,000 deals remain.
Energy Bills and Price Caps
Energy bills have seen some protection through Ofgem’s price cap in England, Wales, and Scotland, which applies to variable deals until July. While energy prices dipped at the start of April, the dynamics of the wholesale market from late May onward will determine future costs. Cornwall Insight forecasts that a typical dual-fuel household could pay £1,861 annually under the July-to-September cap, up from the current £1,641. This prediction, however, is subject to change, as past spikes, like those following the pandemic and Ukraine’s invasion, required government intervention through the Energy Price Guarantee (EPG).
