The Iran conflict has triggered a surge in global oil prices, exacerbating inflation and straining consumers worldwide. Oil prices jumped over 9% this week, with U.S. crude reaching $105 per barrel and Brent crude climbing to $109. The conflict has also disrupted shipping through the Strait of Hormuz, a critical artery for global trade, further tightening supply chains.
Food and fuel costs are rising sharply in response. In the UK, 92% of adults reported higher grocery bills in April, up from 79% in March, according to the Office for National Statistics. Fuel prices have also spiked, with unleaded petrol increasing by 25.2p per litre and diesel by 44.3p since March. The RAC reported petrol at 157.84p per litre and diesel at 187.18p as of May 15.
Financial markets are reacting to the instability, with bond yields surging and stocks dropping. The yield on a 30-year U.S. Treasury bond rose above 5.12%, its highest level in nearly a year, while the S&P 500 and Nasdaq fell by 1% and 1.3%, respectively. Analysts warn that prolonged tensions could push mortgage rates higher due to rising swap rates.
Economic forecasts predict further price hikes, with UK grocery prices expected to rise by 8% by June, according to the Institute of Grocery Distribution. The energy price cap, which fell in April, is projected to increase by 12% in July, reaching £1,853 annually. Meanwhile, the average U.S. gas price has climbed above $4.50 per gallon, a 51% increase since the conflict began.