How the Iran war affects your money and bills

How the Iran War Influences Your Finances

Impact on Fuel Costs

Since the outbreak of the US-Israel conflict with Iran, British motorists have faced rising fuel prices. Crude oil costs have surged significantly, though fluctuations remain due to ongoing tensions and White House statements. As of 13 April, the average petrol price stood at 158.27p per litre, up over 25p from the start of the war. Diesel prices have climbed to 191.5p a litre, an increase of nearly 49p since March.

RAC reports that a 55-litre family car now costs £14 more to fuel than it did at the conflict’s beginning, while diesel has risen by £27. Despite slower price hikes recently, Simon Williams of RAC notes that reductions depend on the progress of peace talks. “The situation remains highly volatile, with outcomes heavily influenced by the Strait of Hormuz,” he adds.

“The situation remains highly volatile, with outcomes heavily influenced by the Strait of Hormuz,” said Simon Williams, RAC’s head of policy.

Effect on Mortgage Rates

Financial markets have also felt the ripple of the conflict. Previously, expectations were for declining mortgage rates, but lenders are now raising charges swiftly. This shift is driven by higher funding costs and doubts about future rate cuts. The average two-year fixed rate has climbed from 4.83% in March to 5.89%, while five-year deals have increased from 4.95% to 5.77%.

Uncertainty has led to a reduction in mortgage product options. Moneyfacts notes around 1,500 fewer residential deals are available now, though over 6,000 options remain. Despite this, the financial information service highlights that some products have been removed during periods of economic instability.

Energy Bill Concerns

While households benefit from a temporary energy price cap in England, Wales, and Scotland, the measure is time-bound and doesn’t apply to all. For variable deals, the cap limits prices per unit until July, but recent trends show a drop in April. Prices could rise sharply again in summer if wholesale energy costs remain high.

Energy consultancy Cornwall Insight forecasts that dual-fuel households may pay £1,861 annually under the July-to-September cap, up from £1,641 currently. This projection could shift depending on developments in the conflict. The government previously intervened during spikes linked to the pandemic and Russia’s invasion of Ukraine through the Energy Price Guarantee scheme.

Experts warn that higher oil prices can indirectly raise the cost of goods and services. For example, increased transport expenses for supermarkets might lead to higher food prices. Meanwhile, drivers are advised to adjust habits, like avoiding aggressive acceleration, to mitigate fuel costs.