How the Iran war affects your money and bills
How the Iran War Impacts Your Finances
The US-Israel conflict with Iran has already begun to ripple through UK households, influencing everything from fuel expenses to mortgage rates. Despite a recent ceasefire announcement by President Donald Trump, talks between the two nations stalled, leaving uncertainty about the conflict’s economic reach. A think tank estimates that the average working-age British household could face a significant financial loss this year due to the ongoing tensions.
Pump Prices and Fuel Costs
Fuel costs have surged as crude oil prices climbed sharply since the war started. The RAC reports that petrol prices reached 158.27p per litre on 13 April, up over 25p from the conflict’s outset. Diesel prices have risen even more, hitting 191.5p a litre—a nearly 49p increase since March. This has led to a £14 rise in the average cost of filling a 55-litre family car with petrol and a £27 jump for diesel.
“The situation remains highly volatile, with outcomes hinging on the Strait of Hormuz’s stability,” said Simon Williams, RAC’s head of policy.
Mortgage Rates
Before the conflict, there was optimism about falling mortgage rates. However, lenders have since raised borrowing costs, driven by higher funding expenses and revised expectations for interest rates. Moneyfacts notes that the average two-year fixed rate climbed from 4.83% in early March to 5.89% currently. For five-year deals, the average rate rose from 4.95% to 5.77% over the same period.
Economic instability has also led to a reduction in available mortgage products. The number of residential deals on the market has dropped by around 1,500, though over 6,000 options remain. Lenders often withdraw products during uncertainty, limiting choices for borrowers.
Energy Bills and Price Caps
Household energy bills are partially shielded by Ofgem’s price cap, which caps unit prices for variable deals in England, Wales, and Scotland. This cap is set until July, though prices dipped slightly in early April. The upcoming wholesale energy market dynamics will shape summer bills. Cornwall Insight forecasts a potential £1,861 annual cost for dual-fuel households under the July-September price cap, up from £1,641 today.
While fuel price spikes can affect goods and services, such as supermarket transport costs, not all households rely on cars. Still, rising oil prices often lead to broader inflationary pressures. A previous energy crisis, following the Ukraine invasion, prompted government intervention via the Energy Price Guarantee (EPG), a precedent that could influence future responses.
