Pump prices in the UK have surged past 150p per litre, and mortgage rates have climbed close to 5% due to the escalating impact of the Middle East conflict on ordinary households. The ongoing turmoil has also led to a staggering £30 billion drop in UK stock prices amidst a global market downturn on Monday.
As inflation is anticipated to rise, the likelihood of a Bank of England rate cut next week has diminished, with discussions now shifting towards a potential increase in borrowing costs. The immediate aftermath has been marked by a sharp increase in oil prices, hitting a four-year peak at nearly $119 per barrel in early trading on Monday.
Although there were hopes for the release of oil reserves to alleviate the situation, prices remained above $100, significantly affecting drivers at gas stations. The RAC reported a notable increase in diesel prices from 148.35p to 150.97p per litre in just two days, with projections pointing towards a potential rise to almost 180p. Unleaded prices have also continued their upward trend, reaching 137.51p per litre by Sunday.
With petrol up by 5p and diesel by 9p since the crisis began, the RAC foresees further price hikes in the coming weeks. The organization estimates that unleaded could soon hit 140p per litre, while diesel is expected to climb to at least 160p. The surge in oil prices is escalating the cost of fuel, with diesel witnessing its fastest increase since the start of the Ukraine conflict.
Industry experts have noted a sharp increase in fixed-rate mortgage costs due to the fallout from the Middle East conflict. The average two-year fixed residential mortgage rate has risen to 4.87%, up from 4.84% on Friday, while the five-year fixed rate now stands at 4.98%, up from 4.96%. These rate hikes are attributed to the surge in swap rates following the conflict.
Financial advisers have expressed concerns about the economic repercussions of the conflict, with fears of inflation spikes and potential interest rate hikes looming. As the war spreads across the Middle East, global energy supplies face disruptions, leading to a significant impact on oil prices and financial markets worldwide. The possibility of stagflation or recession is causing unease among investors amidst the escalating crisis.
