Petrol and diesel prices are climbing rapidly, with analysts warning that unless crude oil costs fall sharply, drivers will face significant price hikes. Every $10 increase in oil typically adds around 7p per litre at the pump, with a time lag of about two weeks. Since the outbreak of the US-Israel conflict with Iran, petrol prices have risen nearly 4p per litre and diesel 6p, according to the RAC.
Global market reactions
The surge in oil prices has already triggered sharp drops in stock markets. London’s FTSE 100 fell 1.4% at opening, while Asia saw major declines: Japan’s Nikkei 225 dropped over 5%, and South Korea’s Kospi fell 6% after triggering a trading halt. Analysts warn that a prolonged shutdown in the Strait of Hormuz could push oil prices above $150 a barrel, further impacting petrol, jet fuel, and fertiliser costs.
Impact on Russia and Ukraine
Higher oil prices may help Russia rebuild its finances, despite prior sanctions and EU/UK price caps. The disruption of oil supplies through the Strait of Hormuz may increase demand for Russian oil, temporarily easing economic pressures on Moscow amid the war in Ukraine.
UK gas prices
UK gas prices have also jumped to 158p per therm from 137p on Friday, although still below the 2022 peak after Russia’s invasion of Ukraine. Rising energy costs have led suppliers to withdraw fixed-price tariffs, but government price caps shield consumers until at least July. Persistent high prices may influence the summer price cap.
UK cabinet minister Steve Reed said there is no “cause for undue alarm yet,” noting the government is monitoring the situation and has sufficient oil and gas supplies.
Middle East conflict escalations
The region remains volatile, with Iranian strikes on Israel and Israeli strikes on Hezbollah in Lebanon. Bahrain’s state-owned energy firm Bapco has declared force majeure after attacks disrupted its refinery. The conflict continues to drive oil and gas price volatility globally.
G7 emergency measures
The UK Chancellor, Rachel Reeves, will join an emergency G7 finance meeting to discuss the economic impact of the conflict, including possible joint releases from strategic oil reserves coordinated by the International Energy Agency.
Source: BBC
Also read: How the Middle East crisis could affect Cyprus’ economy and tourism
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