The ongoing conflict in Iran is beginning to ripple across global markets, raising concerns about rising prices for fuel, gas, shipping, and even basic food products. Experts warn that households in the UK, US, and other countries could feel the impact in daily expenses as disruptions in the region affect energy flows and supply chains.
Petrol and diesel prices have already shown early signs of pressure. In the UK, the average cost of petrol reached 132.14p per litre on Monday, while diesel averaged 142.15p, according to official weekly figures. The RAC reported a rise of 3p per litre for petrol and 5p for diesel from Saturday to Thursday. In the United States, average petrol prices increased by roughly 23 cents per gallon over the week, with diesel up about 41 cents. Analysts note that these initial rises are smaller than those experienced in 2022 after Russia’s invasion of Ukraine.
UK natural gas prices have nearly doubled since Saturday, climbing above 165p per therm on Tuesday before settling slightly lower. Although current prices remain below the peaks of 2022, the spike is prompting concerns about potential increases to the UK energy price cap, which could affect household bills in the coming months.
Shipping disruptions are compounding pressures on global trade. Traffic through the Strait of Hormuz has largely stopped after Iran threatened attacks on passing vessels, leaving about 200 oil tankers stranded. Insurance premiums for affected ships, particularly those registered to the US, UK, and Israel, have risen sharply. Hiring a supertanker from the Middle East to China reached over $400,000 per day on Monday, nearly double last week’s rate, according to the London Stock Exchange Group. Economists warn that higher shipping costs will eventually feed into consumer prices worldwide, though the effects may take months to reach supermarket shelves.
Fertiliser markets are also under strain. The region supplies key ingredients for fertiliser production, and halted traffic in the Strait of Hormuz, combined with reduced output from facilities like QatarEnergy, has pushed the US futures price of urea up by 21% in a week, reaching $567 per tonne. While immediate effects on food prices remain uncertain, prolonged disruptions could eventually increase costs for farmers and consumers.
The conflict has raised questions about the downward trend in inflation. UK inflation fell to 3% in February, with the Bank of England previously projecting it could reach the 2% target by April. In the US, inflation eased to 2.4% in January. Analysts now caution that rising energy, shipping, and fertiliser costs could reverse these gains, affecting central bank interest rate decisions and potentially increasing borrowing costs for households with variable mortgage rates.
The International Monetary Fund has stated it is too early to fully assess the economic impact of the Iran conflict on global markets, noting that the ultimate effects will depend on the conflict’s duration and scope. Consumers may face gradual increases in everyday expenses, from heating bills to grocery prices, as these disruptions continue to unfold.
