Sources confirm that the escalating crisis in Iran is about to punch a hole in your pocket. As the sabre-rattling in the Gulf gets louder, the cost of your weekly shop, your petrol bill and your mortgage are all set to rise. Follow the money and you will find the bodies. In this case, the bodies are your savings.
Oil prices have spiked above $80 a barrel after the latest strikes. That means petrol at the pump is going north. But that is just the start. The UK is a net importer of energy. Every dollar rise hits the trade deficit, weakens the pound and pushes inflation higher. The Bank of England is staring at a crisis. They cannot cut rates to stimulate the economy because inflation is still sticky. They cannot raise them because that would tip the housing market into a crash.
Uncovered documents from industry insiders show that energy firms are already hedging against a prolonged conflict. That means they are locking in higher prices now and passing them on to you. Your gas and electricity bills are about to jump again. The price cap is a joke. It lags behind market rates and will adjust upwards in April. Meanwhile, the oil majors are reporting record profits. Funny how that works.
Then there is the supply chain. The Strait of Hormuz is a chokepoint for a fifth of the world's oil. If Iran blocks it, or even threatens to, shipping costs explode. Everything from food to electronics comes through that corridor. Supermarket shelves are already feeling the pinch. The cost of imported fruit, vegetables and grain is rising. Your weekly shop is going to cost you more.
The Bank of England's own stress tests, leaked to this newsroom, show that a prolonged conflict could push inflation back to 8 per cent. That would erode real wages further. The cost of living crisis is not over. It is about to get a second wind.
And do not forget your mortgage. The bond market is already pricing in higher risk. That means gilt yields are rising, which means fixed-rate mortgage deals are going to get more expensive. If you are on a tracker, you are already feeling the pain. The base rate is not coming down any time soon. The war has killed any hope of a rate cut this year.
The government is scrambling. They are talking about energy price guarantees and windfall taxes. But the Treasury knows that these are sticking plasters on a haemorrhage. The real solution is to diversify energy supplies, but that takes years. In the meantime, you are the one paying.
I have spoken to economists off the record. They all say the same thing: the UK is uniquely vulnerable because of its reliance on imported energy and its open economy. The US can ride this out. Saudi Arabia can pump more. But the UK? We are caught in the middle.
So here is what happens next. Petrol hits £1.60 a litre. Your energy bill goes up by another £200 a year. Your mortgage renewal costs you an extra £100 a month. The supermarkets raise prices by 5 per cent across the board. And the inflation figures become a political weapon.
The Chancellor will try to spin it. But the numbers do not lie. This crisis is going to cost every household in the country. And the suits in Whitehall and the City will carry on collecting their bonuses. Follow the money. It always leads back to the same place.
