The US and Israel unleashed devastating attacks against Iran on Saturday. (Image: Getty)
The US and Israel unleashed a wave of attacks in Iran over the weekend in a coordinated operation. The US claims it was aware Israel was about to attack its long-time adversary and acted before Tehran would have a chance to strike back against its bases.
The attacks killed Iranian supreme leader Ali Khamenei and numerous other high-ranking figures. Iran says almost 800 people have lost their lives in the strikes, and their retaliatory attacks against US bases and allied positions across the Middle East threaten to plunge the region into wider conflict.
And while Britain wasn’t involved in the US-Israeli military action, its wider impacts look certain to be felt by people living in the UK. Iran is a major exporter of oil and gas, and the attacks have sent prices for both surging, with implications for both energy bills and petrol prices. It may also hit mortgage rates, as the Bank of England will have to factor in the new economic impacts when it considers interest rate cuts.
Read on to find out how your energy bills, petrol, and mortgage could be affected.
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What to know about the latest US-Israeli attacks on Iran
Energy bills
One of the ways Britons may feel the impacts is through energy prices, though you’ll have some protection if fix, or have already fixed, your prices.
And even consumers that aren’t will be protected by the price cap, set by Ofgem – for the time being.
Simon Francis, coordinator of the End Fuel Poverty Coalition, explains that it works by “smoothing out price spikes and delaying the passing on of cost increases to consumers”.
But if elevated prices continue they will impact the regulator’s decision about the next price cap, which will be decided in May and take effect from July, Mr Francis said, as per ITV News.
He also cautioned that there are uncertainties about how suppliers will react to the global energy squeezes in the fixed tariff market, noting that they often withdraw or raise the price of deals in periods of uncertainty to shield themselves against volatile wholesale costs.
“Households that rely on heating oil are even more exposed, and the latest surge in those prices will be a major concern for rural and off-grid families needing to refill in the coming weeks.
“This is a stark reminder that the UK is still dangerously exposed to volatile international markets,” he added, arguing that only cutting gas demand through an insulation programme across the country, expanding our domestic renewables, and reforming energy pricing so isn’t at the mercy of global fossil fuel prices will provide lasting protection.
The Ofgem energy price cap will still drop by £117 for an average dual fuel household from April 1 despite the conflict in Iran.
But personal finance guru Martin Lewis points out that fixed deals which currently undercut the price cap are set to go up in price from now, so it’s important to act quickly to avoid exposure to price hikes.
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Mortgages
While mortgages might not seem directly connected to what’s going on in the Middle East, interest rates certainly are, and the economic uncertainties raised by the conflict will be an important consideration within the Bank of England.
Faye Church, Senior Planning Director at Rathbones, raised concerns about the broader impacts of the conflict, including on energy costs, in commentary about Rachel Reeves‘ Spring Statement on Tuesday.
“For most households, geopolitics can feel remote – until it shows up in oil prices — at the petrol pump, on energy bills, and in the weekly shop,” the financial expert said.
“A sustained spike in oil can ripple through the economy via higher fuel and transport costs, feeding into broader inflation and potentially keeping interest rates higher for longer than markets would like.
“That matters because it influences the pace of rate cuts and, in turn, mortgage rates, savings returns and the cost of borrowing.”
Neil Shearing, group chief economist at Capital Economics, said the duration of the shock faced by the markets will matter “as much as its magnitude”.
“If prices retrace over the next few months — either because the conflict de-escalates or because producers increase output to offset any disruption — then the impact on inflation in developed markets is likely to be modest and short-lived.”
However, it could be a different story if global energy supplies take a profound hit, he said.
“Were oil prices to rise to $90–$100 per barrel and remain there, developed market inflation would be about 0.6 to 0.7 percentage points higher than in our baseline scenario.
“Central banks might be forced to raise interest rates, and the squeeze on real incomes would be more substantial.”
Petrol
Surging fuel prices are likely to impact the price you pay at the pump in the near future, though by exactly how much is not yet clear.
Motoring campaigner and FairFuelUK founder Howard Cox warned petrol and diesel costs could surge by up to 20p per litre in the coming weeks due to the fighting that’s broken out in the Middle East.
The Kent-based lobbying group has been urging the Chancellor Rachel Reeves to take action, but Mr Cox voiced disappointment following her Spring Statement in the Commons today.
“This was a missed economic growth opportunity for the Chancellor amid a new damaging oil crisis,” Mr Cox said. “With refineries, oil tankers and the Straits of Hormuz being targeted, oil prices will continue to climb relentlessly.
“A barrel of crude is, at the time of writing, already over $84 (1pm March 3). This will add 5p to 10p per litre in the next week or so.
“A sustained rise in Brent to $100 could add 10p to 20p per litre to petrol and diesel within weeks, based on historical patterns – similar to the surges seen in 2022 when oil hit $120 amid the Ukraine invasion. For over two decades, our clueless politicians have not planned to be self-sufficient in oil and gas production.
“They should be held to account for making the UK reliant on imports. FairFuelUK continues to call on Rachel Reeves to cut Fuel Duty, but at the very least keep it frozen for the lifetime of this parliament.”
However, the RAC’s head of policy Simon Williams believes consumers “really shouldn’t see a shock jump in prices at the pumps as wholesale fuel costs had only been rising gradually in recent weeks”, and called on retailers not to hike prices unnecessarily.
“Even though the price of dated Brent crude rose by $5 a barrel yesterday to $78, the impact of this shouldn’t be felt for over a week,” he predicted.
“But knowing the tendency for price increases to be passed on far more quickly than cuts, on behalf of drivers we urge retailers not to put up the price of fuel they’ve already got in forecourt tanks and reflect any increases in wholesale fuel fairly on the forecourt.”
Addressing the Commons following the statement today, Ms Reeves said the Government’s economic strategy had put the Treasury in a “better place” to handle gas and oil price shocks compared to 18 months previously.