UK households are feeling the financial strain from ongoing Middle East conflicts, particularly as energy bills are set to surge this summer. The escalation began three months ago when the US and Israel initiated airstrikes on Iran. Since then, the UK has witnessed a spike in fuel prices and mortgage rates.
In addition to rising fuel costs, food prices have surged, and airlines have raised airfares. The situation remains uncertain as peace talks stall, with US President Donald Trump warning of potential further attacks. Talks have focused on reopening the crucial Strait of Hormuz and addressing concerns over Iran’s enriched uranium stockpile.
The Ofgem energy price cap is set to rise by 13% to £1,862 annually from July for typical dual fuel households paying by direct debit. The increase, amounting to £221 more per year or £18 monthly based on the current cap of £1,641, will impact electricity and gas bills differently, with gas bills seeing a 24% rise compared to a 5% increase for electricity.
Experts predict an additional rise in energy costs come winter, with forecasts indicating a potential 2% increase to £1,899 in October. Furthermore, heating oil prices have soared post-conflict, prompting the government to allocate £53 million in aid for affected households.
Drivers have also faced higher fuel prices, with petrol now at 159.53p per liter and diesel at 184.59p per liter. To mitigate the financial burden, the UK government has delayed the planned 5p fuel duty cut removal until the end of the year.
Meanwhile, mortgage costs have surged due to anticipated interest rate hikes, with average fixed rates climbing to 5.73% for two-year deals and 5.66% for five-year deals. The Bank of England projects an £80 increase in monthly mortgage payments over the next three years, affecting over half of UK mortgage holders.
The ongoing conflict has impacted air travel as well, with jet fuel prices doubling and leading to potential fare hikes by airlines like easyJet and British Airways. The International Air Transport Association anticipates higher ticket prices in response to escalating fuel costs.