Filling up a family car with diesel now costs £97.22 – £18.91 more than it did on 28 February, before the US-Israel war with Iran began. Petrol has risen by £12.68 per tank to £85.74, according to the RAC. The price at the pump hit an Iran war peak of 159.53p a litre for petrol on 28 May, with diesel reaching 191.54p on 15 April. Although prices have since eased – petrol marginally under 157p and diesel just under 178p – the RAC expects further falls. But the disruption to oil production and transportation across the Middle East has made wholesale costs volatile, and the effect takes about a fortnight to show at the pumps.
The conflict has also driven up mortgage rates. Lenders raised fixed rates quickly after the war began, as funding costs rose and expectations of a base rate cut faded. According to Moneyfacts, the average two-year fixed rate jumped from 4.83% at the start of March to a peak of 5.90% on 12 April, before dropping to 5.61% in mid-June. Five-year deals rose from 4.95% to 5.78%, and now stand at 5.58%. Many borrowers are now facing higher repayments than they had planned. The Bank of England says average monthly payments for those moving onto a new deal will rise by approximately £80 over the next three years. About 53% of UK mortgage holders are expected to see their payments increase.
“UK petrol and mortgage costs surged after the Iran war began, with diesel up £18.91 per tank and mortgage rates peaking at 5.90%.”
Higher petrol prices also feed through to the cost of goods and services, including food, as transport costs for supermarkets rise. Fuel retailers have denied accusations of price gouging, and the regulator has said there is no evidence of widespread profiteering. The political situation remains volatile – hopes of a lasting deal have risen, but any change could quickly alter the impact on personal budgets. Were the Strait of Hormuz to reopen, it would take time for oil and economic activity to flow freely again.