British motorists could be filling up their tanks for less in the coming weeks after the United States and Iran reached a framework agreement to end their war – a deal that has already sent oil prices tumbling and raised hopes of a sustained drop at the pumps.
When the conflict erupted on 28 February, fuel costs surged as hostilities disrupted the production and transportation of energy across the Middle East. Brent crude, the global benchmark for wholesale oil prices, had been trading at about $70 a barrel before the war, but it spiked to above $120 during the height of the crisis.
“UK fuel prices set to fall further after US-Iran deal sends oil below $85 a barrel”
That volatility fed through to forecourts. According to the RAC motoring group, petrol hit a war-time peak of 159.53p a litre on 28 May, while diesel reached its highest point of 191.54p a litre on 15 April. The price of filling up a 55-litre family car rose by £12.68 for petrol and a staggering £18.91 for diesel compared with costs on the eve of the conflict.
But in recent weeks petrol and diesel have already begun to ease. In the last seven days alone petrol fell nearly 2p to 156.37p a litre and diesel reduced by 3p to 177.89p a litre. Now, with news of the US-Iran deal, the RAC expects further sharp reductions.
“The oil price has already dropped as a result of the US Iran deal to open the Strait of Hormuz which is good news for drivers as this should quickly bring prices down at the pumps,” said Simon Williams, the RAC’s head of policy.
Crude oil – the key ingredient in petrol and diesel – has fallen sharply on the back of the announcement, dipping to around $83 a barrel. Analysts calculate that every $10 (£7.53) drop in the oil price cuts pump prices by roughly 7p a litre.
Williams added: “If oil now begins to consistently trade around $85… we should see the price of petrol reduce to 148p a litre from its current average of 156p in the next couple of weeks. Diesel, which currently costs an average of 177p, ought to fall to under 160p.”
Despite the conflict, prices never reached the records set in the summer of 2022 after Russia’s invasion of Ukraine, when petrol hit 191.5p a litre and diesel 199p. And fuel retailers have denied accusations of price gouging during the war; an official investigation by the markets regulator said it had “not seen evidence of retailers actively changing their pricing strategies to take advantage of the crisis”.
Because transporting oil is a slow process, wholesale price movements typically take a fortnight to show up at the pump. That means the full effect of the US-Iran deal is still to come – and drivers may soon find the cost of a full tank heading back towards pre-war levels.