How the Iran war affects your money and bills

Financial Impacts of the Iran Conflict on UK Consumers

The ongoing US-Israel conflict with Iran has already begun to reshape household budgets in the UK, influencing everything from fuel expenses to mortgage costs. Despite a recent ceasefire declared by US President Donald Trump, ongoing talks between the nations have stalled, prompting worries that economic repercussions could persist for months. A research group has warned that the average British household aged 18 to 65 might face additional costs of over £100 this year due to the crisis.

Rising Fuel Costs

Drivers are feeling the strain as fuel prices climb, driven by surging crude oil costs. The motoring body RAC reports that the average petrol price reached 158.27p per litre on 13 April, marking a 25p increase since the conflict began. Diesel prices have similarly risen, hitting 191.5p a litre—a jump of nearly 49p from March’s levels. This translates to a £14 rise in the typical cost for a 55-litre family car’s fuel since the conflict began, with diesel prices climbing by £27 over the same period.

“The rate of price hikes has slowed, but any relief will hinge on the outcome of peace negotiations,” states Simon Williams, RAC’s policy head.

Impact on Mortgages

Financial institutions have adjusted mortgage rates, reversing earlier expectations of declining costs. With lenders citing higher funding expenses and revised forecasts for base interest rates, new fixed-rate mortgages have seen average two-year rates surge from 4.83% in early March to 5.89% currently. Five-year deals have also risen, from 4.95% to 5.77% in the same timeframe. The uncertainty has led to a reduction in available mortgage products, with about 1,500 fewer options now on the market, though over 6,000 deals remain accessible.

Energy Bill Concerns

While households in England, Wales, and Scotland benefit from an energy price cap set by Ofgem, this measure is temporary and excludes some customers. The current cap limits variable energy unit prices until July, with prices briefly dropping in early April. However, future wholesale market conditions will dictate whether bills climb sharply by summer. Cornwall Insight forecasts that a typical dual-fuel household could pay £1,861 annually under the July-to-September cap, compared to £1,641 now.

Analysts note that every £10 rise in oil prices leads to roughly 7p per litre at the pump. Even if oil flows resume through the Strait of Hormuz, consumers may need to wait before seeing tangible savings. Meanwhile, motoring groups advise reducing unnecessary travel and adopting fuel-efficient driving habits to mitigate costs.

Historically, crises like the pandemic and Russia’s invasion of Ukraine triggered government interventions, such as the Energy Price Guarantee. This time, the focus remains on how sustained economic tensions might shape consumer spending in the months ahead.