The signing of a peace deal between Iran and the US on 18 June has raised hopes that the war that sent fuel and energy prices soaring may soon be over – but experts warn the relief at the pumps could be slow to arrive.
The conflict, which erupted in February when the US and Israel went to war with Iran, shut the strategic Strait of Hormuz, a key shipping corridor for global oil and gas supplies. The closure sparked immediate price rises on everything from petrol to air fares, as production and transport of oil in the Middle East slowed or stopped.
“Iran-US peace deal on 18 June raises hope for lower fuel prices, but experts warn relief may be slow.”
Now, with the strait set to reopen, motorists have seen some relief. In the UK, petrol cost an average of 154.72p per litre as of Thursday, while diesel was 174.30p – down from recent peaks but still far above the 132.05p and 141.6p respectively before the conflict began. In the US, the average gasoline price has fallen to $3.97 per gallon from a high of over $4.50 last month, though it remains above the pre-war $2.98. Diesel in the US stands at $5.09, compared with $3.76 before the war.
Simon Williams, head of policy at the RAC, said the recent fall in global oil and wholesale petrol prices, if sustained, would “in time lead to much lower prices at the pumps”. But he added: “The big question is how fast will this happen, and whether the fall in pump prices happens as swiftly as the rise drivers had to endure through March and April did.”
The peace deal itself postpones negotiations on the most contentious issues – including Iran’s nuclear programme – for 60 days, raising questions about how long the truce will last.
UK households face a more immediate blow: the energy regulator Ofgem has already set its next price cap for July, meaning the average household bill will rise by 13% – or £221 a year – from next month. The cap covers 33 million households in England, Wales and Scotland.
Meanwhile, UK gas prices – which almost doubled at the start of the war – have fallen sharply. The benchmark price, which was below 80p per therm before the conflict and hit 157p by 19 March, is now back down to 98p per therm. But Cornwall Insight, a consultancy, warned it would be “overly optimistic” to assume prices will quickly return to pre-conflict levels.
The war also disrupted jet fuel supplies – the Gulf provides about half of Europe’s jet fuel – sending prices soaring. With the Strait set to reopen, airlines may see some respite, but the full impact on air fares remains unclear.
For now, the question hanging over drivers and households is whether the fall in prices at the pump and on energy bills will come as fast as the rises did – or whether, like the negotiations, relief will be deferred.