How the Iran war affects your money and bills
How the Iran War Impacts UK Finances
The ongoing conflict between the U.S. and Iran has already begun influencing the financial landscape for households in the UK, from fuel costs to mortgage rates. Despite a ceasefire declared by President Donald Trump last week, talks between the two nations stalled, leaving uncertainty about the long-term economic consequences. A think tank estimates that the typical working-age household in the UK may face a financial loss of hundreds of pounds this year due to the conflict.
Pump Prices Rise Amid Uncertainty
Petrol station prices have begun climbing, with drivers reporting visible increases. Crude oil costs have surged significantly since the war began, though fluctuations remain frequent as the situation in the region and White House statements shape market dynamics. The RAC reports that the average petrol price hit 158.27p per litre on 13 April, a jump of over 25p from the conflict’s start. Diesel prices have climbed to 191.5p a litre, up nearly 49p since March. This means a full tank of petrol for a family car now costs £14 more annually, while diesel has risen by £27.
“The market is highly volatile, and outcomes will hinge on developments in the Strait of Hormuz,” says Simon Williams, RAC’s head of policy.
Mortgage Rates Face Pressure
As the war intensifies, mortgage rates have also seen a sharp uptick. Lenders have raised borrowing costs swiftly, driven by increased funding expenses and revised expectations about the base rate. The average two-year fixed rate climbed from 4.83% in early March to 5.89% currently, according to Moneyfacts. For five-year deals, the average rate rose from 4.95% to 5.77% over the same period. This shift comes amid concerns that the conflict could delay the anticipated decline in interest rates, which had previously been expected after the pandemic.
During periods of economic instability, banks often reduce mortgage product availability. Moneyfacts notes that residential mortgage options have dropped by around 1,500, though over 6,000 deals remain on the market. The rise in fuel and transport costs has also indirectly affected everyday expenses, with higher energy prices potentially influencing the cost of goods and services.
Energy Bills Tied to Global Market Shifts
Energy bills in the UK are partially shielded by Ofgem’s price cap, which limits the maximum cost per unit of gas and electricity for variable-rate customers until July. While prices dipped at the start of April, the summer months will depend on wholesale energy market trends. A Cornwall Insight forecast suggests that, under the current cap, a dual-fuel household could pay £1,861 annually for energy by July to September, up from £1,641 today. This projection remains subject to change, with a lasting ceasefire potentially easing the strain.
Historically, sharp energy price spikes—such as those following the pandemic and Russia’s invasion of Ukraine—have prompted government interventions. The Energy Price Guarantee (EPG) was introduced to cushion households during those crises. As the Iran war continues, similar measures may be needed to stabilize costs.
