How the Iran war affects your money and bills
How the Iran War Impacts Your Finances and Expenses
Motor Fuel Costs Surge Amid Rising Tensions
As the US-Israel conflict with Iran intensifies, British households are grappling with increased expenses, particularly at the pump. Crude oil prices have climbed significantly since the war began, though fluctuations remain due to ongoing developments in the region and White House statements. According to the RAC, the average petrol price hit 158.27p per litre on 13 April, a rise of over 25p compared to pre-conflict levels. Diesel prices have also surged, reaching 191.5p per litre, up nearly 49p since March. This means filling a family car with 55 litres of petrol now costs £14 more than it did at the start of the conflict, with diesel prices increasing by £27.
Simon Williams, RAC’s head of policy, noted that the rate of price hikes is slowing, but future reductions will hinge on the success of peace talks. “The situation is highly volatile, with outcomes heavily reliant on what occurs in the Strait of Hormuz,” he added.
Home Loan Rates Under Pressure
The financial fallout extends beyond fuel costs, affecting mortgage rates. Initially, there were expectations of declining interest rates, but lenders have instead raised them swiftly. Moneyfacts reports that the average two-year fixed rate has climbed from 4.83% in early March to 5.89% currently. Similarly, five-year deals have increased from 4.95% to 5.77% over the same period. This shift is linked to higher funding costs and revised forecasts about the base borrowing rate.
Uncertainty has also led to a reduction in mortgage product availability. Moneyfacts states there are approximately 1,500 fewer residential mortgage options on the market, though over 6,000 deals remain. Despite this, the impact of higher oil prices may ripple through to everyday goods, as increased transport costs could raise supermarket prices, ultimately affecting household budgets.
Energy Bills Face Uncertainty
While a price cap on energy in England, Wales, and Scotland provides some relief, its duration is limited. Ofgem’s cap applies to variable deals until July, meaning current bills are protected, but future costs depend on the wholesale energy market. Energy consultancy Cornwall Insight predicts that under the July-to-September cap, a dual-fuel household would pay £1,861 annually, up from the current £1,641. However, this projection is not guaranteed.
Energy prices could see a sharp increase if the war continues, though a ceasefire might ease the burden. Previously, during the pandemic and the Ukraine invasion, the government introduced the Energy Price Guarantee to cushion costs. The current situation could lead to similar measures if energy prices remain high.
