A fortnight on from the start of the Middle East war and the financial hit to already cost of living hit UK households is mounting, putting pressure on mortgages, fuel and energy bills
Two weeks on from the outbreak of the US and Israel’s war on Iran and there is no end in sight.
The shockwaves of events unfolding thousands of miles away in the Middle East are already been felt by a growing number of households here in the UK.
From fuel prices to the cost of a new mortgage, it is already possible to count the cost to those impacted. Yet the ripple effect goes well beyond, and threatens to drive up the cost of everything from energy bills and the cost of goods in shops, to flight prices and motor insurance premiums.
Here we examine what the cost to Brits has already been, and what has been dubbed “Trumpflation” could mean in future, unless the conflict is resolved soon.
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Mortgages
How things can change? Just over a fortnight ago, it looked as if a Bank of England rate cut was a slam dunk. Inflation was easing, wage growth was slowing and the smart money was on its Monetary Policy Committee voting to reduce its base rate from 3.75% to 3.5% – with the hope of more to come as 2026 went on.
Lenders was busy reducing fixed rate mortgages in anticipation, in welcome news for those looking for a new home loan or coming off often cheap deals and needing to remortgage.
Fast forward and a Bank cut next Thursday looks dead in the water, with even talk of possible rate rises later in the year. That in itself has been a blow for borrowers with variable rate mortgages or home loans linked to the Bank’s base rate.
Meanwhile, lenders have been rapidly pulling cheap fixed rate deals and replacing them with ones that cost more. Industry experts Moneyfacts says the average new five year fixed rate mortgage has now hit a near 12 month high of 5.19%, up from 4.95% just before the conflict erupted.
The average two-year fix has jumped to 5.10%, from 4.83% a couple of weeks ago. For someone applying a typical two-year fixed rate deal, and borrowing £180,000, that means an extra £336 on their annual repayments. With all important swap rates – which determine lenders’ costs – rising, the hit to borrowers will likely worsen.
To make matters worse, the number of fixed deals on offer has crashed by 530 since the chaos caused by the conflict began on February 28..
Adam French, Head of Consumer Finance at Moneyfacts, said: “Even the very cheapest deals are shooting higher, with the lowest available mortgage rate climbing from 3.51% at the start of March to sit at 3.78% today, its highest level since April 2025.
“It’s unwelcome news for borrowers, as hopes of steadily falling mortgage rates have collapsed and given way to a much more uncertain outlook. The destination is now heavily dependent on how global markets and inflation expectations evolve in response to the conflict the Middle East.”
Estate agents fear the war could shatter hopes of a fragile recovery in the housing market. A survey from the Royal Institution of Chartered Surveyors showed new buyer enquiries had already weakened further in February.
Tarrant Parsons, RICS’ head of market research and analytics, said: “The recent rise in oil and energy prices has increased the likelihood that mortgage rates will remain higher for longer.”
House prices and rents
Strikes by drones on Dubai has also spooked British expats living there, leading to speculation that they – along with property investors – may look for safe havens to put their money. That could include the UK, and especially London, which has the potential to push up house prices.
Even in the short term, it could lead to a spike in rents in some upmarket areas. According to reports, Brit who settled in Dubai are contacting luxury property agents to arrange emergency £5,000-a-week rentals in London.
The Times revealed that agents had been flooded with calls from UK nationals who have settled in the emirate and are now scrambling to come home. If even a few thousand of the wealthiest British expats among 240,000 who live in the UAE come home as a result of the war, it could have a big impact property prices and rents in certain postcodes.
Fuel prices
Petrol and diesel prices have risen sharply, causing fresh misery for motorists. And the price of heating oil has doubled, with households in rural areas among those left reeling.
Data from the RAC revealed the nationwide average for unleaded has reached 140.60p a litre. Diesel has risen even faster, surging to 158.23p. The surge has added nearly £9 to the cost of a typical fill-up for a diesel driver, and £3.85 a go for unleaded.
RAC head of policy Simon Williams said: “Households, especially those that depend on the car, are under increasing financial pressure as a result of the conflict in the Gulf.
“The average price of a litre of unleaded has now risen by 6%, or nearly 8p, to 140.6p since the start of the conflict and is it at its highest in 18 months. Diesel has rocketed by 12% – or almost 17p – to 159.18p a litre, a price we’ve not seen since November 2023. Filling a family car is now £4 and £9 more than it was less than two weeks ago.
“The fact the cost of a barrel of oil has exceeded $100 and wholesale fuel prices continue to rise is concerning, but it’s the speed at which drivers are feeling the effects which is under the spotlight now.
“Drivers deserve – and should expect – to be treated fairly when it comes to filling up, especially with pump prices still heading north.”
To add to concerns, a report from experts at Fathom Consulting warned a prolonged blockage of the Strait of Hormuz could lead to oil prices above $170 per barrel and a global recession.
Energy bills
Another big threat come from a potential surge in energy bills – not just for households but businesses too.As it is, most households are protected for now because of Ofgem’s price cap, which limits how much suppliers can charge per unit of energy.
The cap will actually fall from April 1, with average annual bill coming down by on average £117 a year, to £1,641. That’s mostly thanks to Chancellor Rachel Reeves’ announcement in the last Budget that an average £150 worth of policy costs were being removed from what customers pay. This was before events in Middle East blew up, and wholesale costs – which account for the biggest chunk of customers’ bills – soared.
The problem is what happens when Ofgem’s price cap next changes, in July. It’s early days but the surge in wholesale costs is likely to mean the cap going back up. Quite by how much depends how long those costs remain high.
The price cap is determined by the average cost of wholesale gas over the next three months. Industry experts Cornwall Insight has estimated the cap could jump back up by £186 a year to around £1,827. That was based on the closing price of gas on March 3, since when prices have risen a further 10%.
The reality is that the longer the conflict goes on, the higher bills could be in July. On the flipside, if the war is resolved quickly then the impact could be less.
That is not much comfort to households who, unlike the price cap, are on fixed rate energy deals. These have been much cheaper than standard tariffs – those covered by the cap – but the wholesale cost spikes mean there are far fewer now. However, there are early signs that this may be change. Price comparison website Uswitch.com says the number of fixed energy tariffs available has increased this week despite the ongoing conflict in the Middle East. As of midday on Friday, there were 22 fixed energy tariffs available, seven more than there were on Wednesday.
The cheapest fixed tariff is £1,646 for the average household, from Outfox Energy, which is estimated to cost approximately £1,511 once levies are removed from April, which would undercut the April cap by around £130. Richard Neudegg, director of regulation at Uswitch.com, said: “After a brief period of tariffs being removed, repriced and replaced last week, fixed deals seem to be holding steady and savings are still available.”
Holidays
Even many families’ precious week or so in the sun could cost more this year. The cost of jet fuel has leapt by about 80% since the start of the Middle East crisis a week ago.
The Middle East and its Gulf states is a major source of aviation fuel, accounting for about 50% of Europe’s imports, meaning ticket prices could rise, further fuelling inflation. There are some of Brits putting holiday plans on hold, and making big changes, because of the Middle East crisis. Leading holiday firm On the Beach reported a “significant” drop in demand from families for getaways to normally popular hotspots Turkey, Greece, Cyprus, and Egypt.
While higher jet fuel prices will put upward pressure on fares, falling demand for certain destinations could work the other way.
Data from the website Travelsupermarket shows people are already making different booking decisions because of events in the Middle East. Online searches for holidays to the Dominican Republic in the Caribbean soared 123% in the first 11 days of March, it said, with Cape Verde and Antigua both doubling. Higher prices for foreign breaks could prompt more people to holiday at home.
Richard Young, chief executive of holiday company selfcatering.co.uk, told the Mirror: “Global uncertainty and rising fuel prices can quickly influence how people plan their holidays, and when overseas trips become more expensive and potentially dangerous, many start looking closer to home. We saw this during the pandemic, periods of airline disruption and previous fuel price spikes, and at times like this interest in self catering breaks tends to rise as they offer families a chance to enjoy a proper getaway with more space and flexibility, without the stress, anxiety, rising costs and unpredictability of travelling abroad.
”Yorkshire Dales and Norfolk – not always at the top of people’s list, but likely to see a spike as people venture out of the hot spots. Northumberland always popular (Alnwick, Bamburgh), Devon popular and crowded (Salcombe, Dartmouth), Cotswolds (expensive anyway but will likely see a further increase), anywhere around the Lakes and Highland hot spots such as Braemar, Fort William and Inverness.”
Insurance
It might not be an obvious impact, but it is claimed the conflict could also drive up the cost of motor insurance.
Kara Gammell, car insurance expert at MoneySuperMarket, explains: “The conflict could disrupt supply chains, which in turn could lead to higher shipping costs and make some raw materials used in car parts harder to source. If replacement parts become more expensive or take longer to arrive, repair costs could rise too. When insurers set premiums, they look at how much it costs to repair vehicles and settle claims, so any increase in those areas may put some upward pressure on what drivers pay. You might not notice any big changes straightaway, but if your renewal is coming up, it’s always worth shopping around.”
