New ‘£332 charge’ for homes across UK after Monday statement | Personal Finance | Finance

US President Donald Trump has announced a decision to postpone strikes on Iranian energy sites by five days, having issued a threat of attack if the country does not reopen the Strait of Hormuz by midnight on Monday. The threat being suspended but not withdrawn could imply that an effective closure of the critical international shipping route persists for longer.

Prime Minister Sir Keir Starmer‘s official spokesman stated on Monday that the “Strait of Hormuz specifically needs to be reopened”. Here, the Press Association has examined 10 ways that the disruption to the strait could affect people’s finances.

Oil and gas

A significant consequence of disruption to the Strait of Hormuz, linking the Persian Gulf with the Gulf of Oman and the Arabian Sea, is on the world’s oil and gas supplies. The strait is a vital shipping channel, utilised by tankers transporting about one fifth of the world’s oil supplies and seaborne gas.

In 2024, approximately 20 million barrels of oil flowed through it per day, according to the US Energy Information Administration. It estimated that more than 80% of the crude oil and liquefied natural gas (LNG) that moved through the Strait of Hormuz was destined for Asian markets in 2024.

Whilst UK imports from the Middle East are limited, disruption to supplies means demand for alternatives rise, driving global prices higher – which is what has occurred with crude oil and natural gas prices in recent weeks.

Fuel

One of the most immediate ways that elevated crude oil prices impact households is through the cost of wholesale fuel, which is driving prices at petrol stations significantly higher. The average price of unleaded petrol has increased by 14p a litre, or roughly 11%, since before the intensification of the conflict in the Middle East at the end of February, according to the latest figures from the RAC.

The situation is more severe for drivers of vehicles using diesel, which has risen by 29p a litre, or approximately 20%, to reach the highest price since January 2023. Simon Williams, the RAC’s head of policy, stated drivers were “in for a rough ride at the pumps in the run-up to the Easter break with no end to price increases in sight”.

Household energy bills

The effect of higher wholesale energy prices is likely to take longer to filter through into household gas and electricity bills, with prices currently fixed until the end of June. However, July is when the energy regulator Ofgem sets its next price cap, which will be based on average prices between March and May.

Energy consultancy Cornwall Insight has revealed that its prediction for the regulator’s next price cap has rocketed to £1,973 a year for a typical dual fuel household – an increase of £332 or 20% on April’s cap. It is revising its forecasts every week whilst energy markets remain unstable, and the figure is likely to alter. The Bank of England also cautioned last week that even a brief conflict was likely to keep energy prices high for a prolonged period, leading it to elevate its outlook for UK inflation through 2026.

Heating oil

Domestic heating oil, utilised by approximately 1.5 million households in the UK – primarily in Northern Ireland – is not included in Ofgem’s price cap. The UK’s Competition and Markets Authority (CMA) is investigating concerns that households dependent on heating oil are facing abrupt price hikes due to the conflict.

The Government recently announced that around £50 million will be made available to assist low-income families who heat their homes with oil. Some £17 million has been allocated to Northern Ireland, England will receive £27 million, Scotland £4.6 million and Wales £3.8 million.

Fertiliser

Regions in the Middle East are significant producers of fertiliser used for farming, such as ammonia and sulphur, so any disruption could escalate costs for farmers globally. Experts stated that fertiliser price surges could impact products such as bread, cereals, pasta, potatoes and animal feed.

Jonathan Owens, a supply chain expert and senior lecturer at the University of Salford, said: “Rising costs and shipping delays could disrupt planting and harvesting cycles if this plays out for the long term. Livestock farmers may also face challenges as feed prices increase, putting additional pressure on meat and dairy production.

“These disruptions could threaten the stability of essential food supplies, making some staples more expensive or harder to find. Over time, we may see certain product choices diminish or disappear, like what happened during the pandemic.”

Shop prices

Increasing oil and shipping costs alongside disruption to supply routes and raw materials could begin to filter through to shop prices in the months ahead. Fashion, electronics and homeware could be affected if freight costs rise or delivery times lengthen, as many UK brands depend on global supply routes that pass through or near the region.

Manufacturers and businesses that consume substantial energy could also be impacted by higher wholesale prices, and this could mean that costs are passed through to consumers via elevated shop prices. The impact on shop prices will depend on how long the conflict continues and how far energy prices remain high.

Perfume and Dubai chocolate

Analysts have stated specific categories to monitor include fragrance, as the Middle East plays a crucial role in producing ingredients used in many perfumes, particularly oud and other luxury scent bases. Marty Bauer, a retail analyst at Omnisend, commented: “Luxury confectionery is another area. The recent surge in popularity of pistachio-rich ‘Dubai chocolate’ and Middle Eastern-inspired sweets relies on imported nuts and speciality ingredients.

“If shipping routes are affected or costs rise, those products may become more expensive or harder to source. The countries currently affected by conflict are also big producers of dates, olive oil, nuts and spices such as saffron.”

Interest rates

The disruption to the Strait of Hormuz and the subsequent effect on energy prices has already altered the course for UK borrowing costs, which had been on a downward trajectory prior to the conflict. The Bank of England maintained interest rates at 3.75% last week in the first unanimous vote since 2021.

Governor Andrew Bailey warned that further cuts were “not on the horizon”, while hinting at potential increases to borrowing costs instead. Other policymakers at the Bank suggested interest rates may need to rise in response to sustained pressure on inflation.

Mortgages

Britain’s largest lenders have been ramping up their mortgage rates over the past few weeks, whilst nearly 1,500 homeowner deals have vanished from the market, according to financial information website Moneyfacts. Lenders have been rushing to increase the mortgage rates they are offering and withdraw some products in response to shifting inflation expectations, with the conflict in the Middle East exerting pressure on prices. Swap rates, which lenders use to price mortgages, have been climbing in recent weeks.

Investments

The disruption to global energy markets is causing significant volatility in the world’s financial markets, leading to heightened uncertainty for investors. Experts suggested that investors can benefit from adopting a longer-term perspective of their investments and considering whether their portfolios are suitably diversified.

Tom Stevenson, investment director for Fidelity International, said: “The swing in relative performance makes a strong case for holding a diversified portfolio, geographically if not at the moment by asset class. Holding a good spread of investments can provide a smoother ride over the longer term. The ups and downs of the market during periods of uncertainty are the price investors pay for those superior long-term returns.”