Oil markets lurched higher this afternoon after US forces launched a fresh wave of strikes against Iranian targets in the Persian Gulf. Brent crude spiked above $92 a barrel, its highest level since October, stoking fears that British motorists will soon be paying £2 for every litre of petrol. The RAC warned that a sustained rally could push average pump prices past that psychologically damaging threshold within weeks.
The latest escalation comes just days after Tehran resumed uranium enrichment at Fordow, prompting Washington to retaliate with air raids on IRGC facilities. For the man on the Clapham omnibus, this is a direct hit to his wallet. The Treasury will be watching gilt yields nervously, as higher fuel costs feed into inflation expectations and complicate the Bank of England's rate path.
Every $10 rise in oil adds roughly 3p to a litre of petrol, according to analysts at Goldman Sachs. At current prices, the average UK household is already forking out an extra £50 a month on fuel compared with a year ago. The market's response was predictable: a flight to safety saw the dollar strengthen, while the FTSE 100 slipped 1.
2% as energy stocks rallied. The 10-year gilt yield edged up to 4.8% as traders priced in a more hawkish BOE.
The real question is whether this is a blip or the start of a prolonged conflict. If Iran blocks the Strait of Hormuz, all bets are off. For now, the City is bracing for volatility.
The Chancellor's fiscal headroom is evaporating with every barrel. With inflation already sticky, this is the last thing the economy needed.
