As the US-Israel war on Iran continues to rage, the Mirror takes a look at how the purse strings of ordinary Brits will be affected by the conflict day to day, from cancelled holidays to ‘petflation’
While the UK isn’t directly involved in the US-Israel war on Iran, ordinary households across the nation will undoubtedly feel the effects day to day, in ways they may not have anticipated.
Today, Education Secretary Bridget Phillipson urged motorists to “carry on as usual” ahead of the upcoming Easter bank holiday weekend in an interview with BBC News, amid fears of potentially disruptive fuel shortages.
This comes as countries across the world take measures to “gently reduce consumption” amid the ongoing energy crisis, as raised by former head of strategy at BP Nick Butler, on the Today programme, prompting calls for ministers to consider restrictions on managing fuel supplies.
It’s clear that, while we may well carry on as usual, we are currently navigating highly unusual times, with experts fearing that this additional pressure could well tip already strained households over the edge.
READ MORE: Top minister gives update on Iran war fuel shortage fears ahead of Easter break
Petrol
Perhaps the most prominent everyday issue for Brits is the price of petrol, with already squeezed motorists paying an additional £300 million at the pumps since the war began on February 28, according to an eye-watering analysis by the RAC Foundation. On March 16, the average price of unleaded petrol at UK pumps was 140.28p per litre, while the average price of diesel stood at 158.78p per litre.
On Tuesday, March 24, the Department for Energy Security and Net Zero (DESNZ) announced that, as of March 23, the average price for unleaded was 144.16p, and for diesel, 166.88p, rising by 3.9p and 8.1p, respectively, in the space of just one week. This marked the highest diesel price since March 2023, as well as the highest unleaded petrol price since July 2024.
It’s easy to see why drivers have been left feeling anxious as the war rages on, with Iran’s block on tankers passing through the Strait of Hormuz, a vital maritime corridor located between the Persian Gulf and the Gulf of Oman, through which almost one-fifth of the world’s oil supply would usually pass. This development has sparked an energy crisis, concerns over international shipping and fears over a possible global recession, with oil prices having soared to more than $100 a barrel.
On this note, the Mirror heard from Mike Scott, an award-winning climate change journalist with expertise in the fields of sustainability, energy and carbon markets. Mr Scott, who found the environment and business issues focused Carbon Copy Communications, warned: “Petrol and Gas will cost more because about a fifth of global supplies of each travel through the Straits of Hormuz. So filling up your car will be significantly more costly.”
Commenting on sobering predictions that fuel shortages in Europe could begin “as early as next month if the war drags on”, Mr Scott cautioned: “In the worst case, this could lead to fuel rationing and queues around the block, but we’re a long way off that yet.” And the situation could well have been far worse, Mr Scott noted, had we not been generating much of our power from renewable energy, adding up to “more than half in 2024”. The price of this, he explained, “won’t change at all”.
When it comes to charging eco-friendly electric cars, a popular choice in recent years, prices will go up slightly, but, as emphasised by Mr Scott, this “won’t be anywhere near the hit that petrol and diesel drivers suffer.” Looking ahead to the future, it’s thought this could well result in an interesting shift in car consumer habits. Mr Scott remarked: “In the longer term, it makes electric vehicles and renewables look a lot more attractive – there’s no wind or solar power being stopped from travelling from the Middle East.”
Gas and electricity
While news of the energy price cap being lowered in April will undoubtedly come as an enormous relief to many cash-strapped Brits, it’s feared a hike in bills could be on the horizon. While the price cap is thankfully now locked in at £1,641 for the period between April and June, Laura Suter, director of personal finance at AJ Bell, has warned that we could see an unwelcome increase later in the year.
Indeed, estimations show household bills could well rise up to £1,000 annually, as the war rages on, with heightened gas and oil prices having a knock-on effect on how ordinary Brits power and heat their own home. Currently, the average annual energy bill in the UK sits at £1,641; it’s thought this could potentially surge to more than £2,500 depending on how the conflict develops.
On this topic, the Mirror also heard from Ramin Nakisa, a former investment bank strategist and founder of PensionCraft, who told us: “When people think about a Middle East conflict hitting their wallet, they jump straight to petrol prices. And they’re right, but that’s only the beginning. Oil is priced globally, so conflict anywhere in the Gulf pushes up prices everywhere, and that feeds into electricity bills too because gas-fired power stations still set the marginal price of UK electricity much of the time.”
This comes amid growing pleas for support in the uncertain months ahead. Earlier this week, the Chancellor of the Exchequer, Rachel Reeves, announced that she would be meeting with supermarkets and banks to see what could be offered to help customers; however, to the disappointment of some fellow MPs, she failed to announce any new measures to address the ongoing cost of living, in light of these recent developments.
Phone bills
While Mr Scott has advised that “there’s no reason phone bills should go up”, with digital products being “relatively unaffected”, we may well see a knock-on blow when it comes to consumer electronics. Mr Scott told us: “In the long run, the cost of consumer electronics will suffer from the increased costs of shipping caused by shippers being reluctant to use the Suez Canal for safety reasons.”
According to Mr Scott, there will also be “some unexpected impacts” that consumers may not have considered. For example, oil-rich Qatar is known to produce a third of the world’s helium, which Mr Scott emphasised is “an essential raw material in the chip industry and medical imaging procedures like MRI scans”. He continued: “That means that in the longer term, the price of computer chips could increase, which would feed through to higher prices for phones, computers, cars and other consumer electronics devices, as well as sectors like aerospace and AI. And more expensive party balloons, obviously.”
Mr Nakisa also shares Mr Scott’s concerns over a block supply of helium, which many may not realise is essential for products we use every single day, including the chips needed for your car. And unfortunately, this means we may well end up paying more in the long-term. As explained by Mr Nakisa, “One that almost nobody thinks about is helium. The Gulf region, especially Qatar, is a major helium producer, and helium is essential for manufacturing semiconductors. That means the chips in your phone, your laptop, your car. A supply disruption adds cost and delay to an already stretched supply chain, so you could end up paying more or waiting longer next time you upgrade your phone.”
Mortgages
Earlier this month, lenders responded to the unfolding situation in the Middle East by beginning to raise interest rates on fixed-rate mortgages. And while more direct factors, such as petrol prices, are relatively simple to understand, this one is a bit more complicated. According to Moneyfactscompare, the average two-year fixed mortgage is now 5.56 per cent (up from 4.83 per cent at the start of March), while the typical rate charged by a five-year fixed deal now sits at 5.54 per cent, compared to 4.95 per cent at the beginning of the month.
Shockwaves reverberating around the markets, triggered by soaring oil prices, have seen lenders adjust accordingly, removing more than 1,500 mortgage products since March 9, and disappointing many potential buyers. And while it’s hoped this is simply a “temporary blip”, this may depend on how quickly the conflict is resolved.
Mr Nakisa explained: “Perhaps the biggest hidden impact is on mortgages. If conflict keeps energy and food prices elevated, that feeds into inflation, which makes it harder for the Bank of England to cut interest rates. Every quarter-point that stays on the base rate translates into hundreds of pounds a year for anyone on a variable rate or coming off a fixed deal. Geopolitical conflict in the Gulf can keep your mortgage rate higher for longer, and that’s a connection most people simply don’t make.”
Meanwhile, Mr Scott warned: “We can expect to see mortgages rise – all of the increased costs mentioned above will lead to inflation, which the government almost had on target before the war. Higher inflation will lead to higher interest rates to try to bring it under control, and that means higher mortgage rates.”
Food shopping
Factors such as the Coronavirus pandemic and the Russian invasion of Ukraine have already seen Brits feeling the pinch when it comes to their weekly shop, with grocery bills now around 38 per cent higher than pre-Covid levels. Now, a worrying new, highest-impact scenario from the IGD (Institute of Grocery Distribution) suggests we may see a “short-lived but severe” hike in food prices, with the conflict resulting in food inflation more than doubling by summertime. In real terms, this could add more than £150 to the average household’s yearly grocery bill, all while many families are already struggling to stay afloat.
Stark shifts in oil and gas prices would affect the food supply chain right the way through, from production costs to transportation. As explained by Mr Scott, as well as everyday food essentials, dining out at restaurants may also prove more costly, partly due to rising costs of transporting goods, partly because of higher energy prices, and partly because energy-intensive food production will also see a price hike.
Sadly, this particular disruption may well push already struggling households over the brink. Mr Scott told us: “A huge amount of the raw materials that go into fertiliser originate from the Gulf, and that supply has been disrupted just as planting season starts in many parts of the world. With many people already on the breadline because of the cost-of-living crisis (in part triggered by the last upheaval, the war in Ukraine), some families may struggle to afford food and heating.”
Breaking down exactly why our supermarket trollies will take such a hit, Mr Nakisa said: “The second-round effects are what really catch people off guard. Take food: it’s not just that it costs more to run the lorries and refrigeration units. Ammonia, which is the basis of most nitrogen fertiliser, is made from natural gas. If gas prices spike during planting season, farmers either pay through the nose or use less fertiliser and get lower yields. Either way, that cost ends up on the supermarket shelf.”
Holidays
With the war having already taken a severe toll on travel, it’s believed we could be about to see some changes in how Brits take their summer holiday. The price of jet fuel skyrocketed by 80 per cent in the week that followed the current crisis. As a major source of aviation fuel, the Middle East and its Gulf states account for around 50 per cent of Europe’s imports. This means airline ticket prices could leap, in turn fuelling more inflation.
And while some Brits have sadly opted to hit pause on their holiday plans, there are those who’ve found themselves looking for alternative destinations. While travel company On the Beach has recorded a “significant” drop in demand for family getaways to Turkey, Greece, Cyprus, and Egypt, Travelsupermarket noted a 123 per cent rise in online searches for holidays to the Dominican Republic in the first 11 days of March, with searches for Cape Verde and Antigua both doubling. Meanwhile, higher prices could well see Brits enjoy holidays closer to home, dodging costly air travel altogether.
Mr Scott predicted: “The cost of getting away from it all is also set to surge. Anywhere east of Turkey is either off-limits (UAE) or a lot more difficult to get to because the Middle East’s airspace is effectively shut. That means a lot more people are going to be trying to book holidays in Europe and closer to home, where the competition for scarce hotel rooms will push up prices.
“Expect more people to opt for holidays in the UK and Western Europe this year – or to head west to Canada, Mexico, the Caribbean or South America rather than to Asia. Given what Trump’s saying about Cuba, that’s probably one to avoid, and I suspect many people will be put off travelling to America, World Cup or no World Cup. And if you’re flying, it’s the same as motoring – fuel just got way more expensive.”
Prices aside, holidaymakers may also experience a number of additional and perhaps unforeseen disruptions along the way. Mr Scott explained: “On top of that, the war has meant a lot of flights being cancelled, planes being in the wrong place, and fewer seats available. A number of airlines have temporarily shut down routes, and it will take a while to reopen them when it’s deemed safe to do so.
“Your holiday insurance could see a price hike if you’re going to somewhere now deemed a riskier destination – Israel or Cyprus, for example – and there’s a higher risk of cancellations if the war spreads to other countries, which might not be covered by your insurance. Hiring a car won’t escape the increase, although mainly because of higher fuel prices. Hiring an EV may help you escape some of the worst impacts.”
‘Petflation’
Unfortunately, this most recent pinch to the purse will likely also affect your furry friend, affecting everything from their favourite kibble to vital trips to the vet. Commenting on this possible ‘petflation’, Mr Scott remarked: “It won’t just be feeding your family – your pet’s food will see price rises, too, for the same reasons. Vet bills might increase if the price of drugs goes up.”
Delving into the supply chain issues here, Mr Nakisa forewarned: “Pet food gets caught in the same squeeze as human food because it’s made from the same commodities and moved on the same supply chains. Vet bills are different. A lot of veterinary pharmaceuticals and specialist equipment are imported, and if the pound weakens on global risk-off sentiment, those imports get more expensive.”
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