How the Iran war affects your money and bills

Q: Why are petrol and diesel prices rising in the UK because of the Iran war?

Petrol and diesel prices are rising because crude oil prices have jumped since the conflict began. Analysts say every $10 increase in oil typically adds about 7p a litre to pump prices. The article says average petrol has reached 157.02p a litre and diesel 189.42p a litre.

Q: How much more does it cost to fill up a family car now?

It costs significantly more to fill up than it did at the start of the conflict. The article says the average cost of filling a 55-litre family car with petrol has risen by £13, while diesel is up by £26. These increases reflect the higher pump prices seen since the war began.

Q: What is happening to mortgage rates during the conflict?

Mortgage rates have been rising instead of falling. Lenders have increased rates because their funding costs have gone up and they no longer expect the base rate to fall as quickly as before. The average two-year fixed rate has risen to 5.89%, while the average five-year fixed rate is now 5.78%.

Q: Could the war lead to higher energy bills later this year?

Yes, higher wholesale energy costs could push household bills up from the summer. Ofgem’s price cap currently limits prices for variable tariffs in England, Wales and Scotland until July, but forecasts suggest a typical dual-fuel bill could rise to £1,871 a year from July to September. The exact outcome depends on how wholesale prices move in the coming weeks.

Q: Will flights and holidays get more expensive because of the Iran war?

Yes, flights could become more expensive if jet fuel stays costly. The article says airlines can absorb some of the impact through buying strategies, but prolonged high fuel prices may eventually be passed on in higher fares or fewer flights. That could also limit holiday options in spring and summer.

From petrol prices to mortgage rates, the US-Israel war with Iran has already had an impact on people's finances in the UK. How deep and sustained that turns out to be depends on the duration of the conflict and how quickly supply lines and economies can recover. Here are some of the areas to watch out for. Drivers are likely to have already noticed that prices at the pump are on the rise. Average petrol prices have hit 157.02p a litre, 24p higher than at the start of the conflict, according to the RAC motoring organisation. Diesel has jumped to 189.42p a litre, up 47p since the beginning of March. It means that the average cost filling a 55-litre family car with petrol has increased by £13 since the start of the Iran conflict, with diesel up by £26. In early March, the increase in pump prices triggered a row between petrol retailers and the government. Retailers accused the government of using "inflammatory language" by suggesting firms were profiteering from the oil price surge. According to analysts, every $10 increase in oil pushes up pump prices by roughly 7p a litre. Crude prices have risen sharply since the start of the war, although they are volatile as they react to the status of the conflict and commentary from the White House. While motoring organisations say that there are plenty of supplies, they are encouraging people to reduce non-essential journeys. They also suggest people amend their driving style, by not accelerating or braking too hard to conserve fuel. Not everyone has a car or may not use one for a daily commute. However, when petrol rises, it can carry through to higher prices for goods and services. For example, if transport costs for supermarkets increase that could then be reflected in the cost of food. Before the war began, there had been a hope and expectation of a steady fall in the interest rates charged on new, fixed mortgages, as well as lower variable rates. Now, the opposite is happening. Lenders have raised rates quickly, due to their own funding costs rising and an expectation that the base borrowing rate will not fall as previously anticipated. The average two-year fixed rate has jumped from 4.83% at the start of March to 5.89% now, its highest since July 2024, according to the financial information service Moneyfacts. The cheapest deals have risen the fastest. For those looking for a five-year deal, the average rate has risen from 4.95% to 5.78% over the same period and is now at its highest level since November 2023. At times of economic uncertainty, lenders pull mortgage products off the shelves, reducing choice. There are now about 1,500 fewer residential mortgage products on the market, according to Moneyfacts, although that still leaves more than 6,000 deals to choose from. "When lenders take the step of pulling deals rather than simply tweaking pricing, it often indicates that funding costs have moved too quickly for incremental changes to keep pace," said Adam French, head of consumer finance at Moneyfacts. There is some protection in place for household gas and electricity bills, thanks to the price cap in England, Wales and Scotland set by energy regulator Ofgem. However, it is time limited and does not cover everyone. The maximum price for each unit of energy, for those on variable deals governed by the cap, is set until July. In fact, prices went down at the start of April. However, what happens between now late May on the wholesale energy market will determine these household bills from the summer. A sustained period of high wholesale costs could mean a sharp increase in energy prices for millions of people. Energy consultancy Cornwall Insight's latest forecast predicts that, under Ofgem's price cap for July to September, a dual-fuel household using a typical amount of gas and electricity would pay £1,871 a year, up from the current £1,641. However, this forecast is subject to change. The last time there was a particular spike, following Covid and Russia's invasion of Ukraine, the government had to step in to help with the Energy Price Guarantee (EPG). The chancellor has said there could be government support if needed for bills but, unlike the EPG, it would be targeted at those who need it most, rather than universal. Those looking to fix their energy unit price instead are facing a similar situation as people searching for a mortgage. Some energy tariff providers have pulled deals, or have now set them at a higher price. Geopolitical uncertainty also means there are likely to be fewer deals with a longer duration. The most immediate impact of rising prices is felt by those who use heating oil, often stored in a tank outside their property. There is no cap that limits the cost. Heating oil is used widely in rural areas and in Northern Ireland. Prime Minister Sir Keir Starmer announced support amounting to £53m for the most vulnerable users of heating oil. The money will be distributed via the devolved authorities. In England, councils will decide who qualifies and how they will receive the financial help. Competition authorities are also checking whether customers are being treated fairly. "Generally, we would expect that customers who have placed orders for heating oil should receive it at the agreed price. Suppliers should be clear what they are charging and terms must be fair," said Emma Cochrane, at the Competition and Markets Authority. At the start of March, UK inflation - which charts the rising cost of living - was forecast to be at or around the Bank of England's target level of 2% over the next five years, according to the Office for Budget Responsibility (OBR). The government's official forecaster said the price of a typical basket of goods would be going up at a rate of 2.3% this year and then 2% a year from 2027. But, it did those sums before the airstrikes on Iran began. Now, analysts believe the rate of inflation is unequivocally on the rise. Making an inflation estimate becomes very difficult, given the volatile situation militarily and economically. However, analysts do not think inflation will return to the peak of 11.1% seen in the UK in October 2022. That is because the war in Ukraine also caused spikes in the prices of basic foodstuffs, such as wheat and edible oil, owing to the role of Ukraine in producing those items. That is not the case now. The Bank of England is charged with getting inflation to as close as 2% as possible, and its primary tool to do so is interest rates. After the rate-setting committee met in February, the Bank's governor Andrew Bailey said there was scope for further rate cuts this year. A month on, the committee held the Bank rate at 3.75%, and adopted a wait and see approach. Many analysts believe the next move in interest rates is likely to be up, not down. But while borrowing money could become more expensive than previously thought, savings could be slightly more lucrative. In times of uncertainty, people have previously hoarded savings. The spending power of that money may reduce, if the cost of living rises, and it may hit general economic growth in the UK. Wider implications for our finances are highly dependent on how the war - and its global impact - plays out. But, the choice of holiday destinations in the spring and summer may be more limited. Flights could get more expensive. Jet fuel has gone up sharply in price. Although airlines have buying strategies that limit some of this impact, the longer aviation fuel remains expensive the harder it is not to pass this on through higher fares, or reduced flights.