Global energy markets have been significantly impacted as Brent crude, the international benchmark for oil prices, surged to $100 a barrel for the first time since May.
The price rose by more than 6% on Thursday, following several days of steady increases as the United States intensified military strikes against Iran.
This upward trend marks a sharp reversal from the period following a temporary ceasefire between the US and Iran, when prices had dropped back to levels seen before military action began on February 28.
The market volatility was further fueled by Houthi militia in Yemen, who have launched attacks on oil tankers in the Red Sea. This region is a critical export route, frequently utilized by Saudi Arabia to bypass the Strait of Hormuz.
Alongside oil, gas prices have also climbed steadily over the past month, with the benchmark UK gas price now sitting at approximately 150p per therm, a notable increase from the 98p recorded at the end of June.
These energy price hikes are already affecting consumers directly. New data released on Thursday indicates that UK petrol prices have risen by 5p a litre since the start of July, reaching nearly £1.56, while diesel averages £1.72 a litre according to the RAC.
In the United States, average gasoline prices have climbed back above $4 a gallon, up from $3.92 a month ago, as reported by the motorist advocacy group AAA.
Economists are expressing concern that the ongoing conflict could drive up inflation in both the UK and the US. While inflation had previously shown signs of cooling—falling to 2.6% in the UK for the year to June and 3.5% in the US—there is significant uncertainty regarding whether this trend will persist.
Jonathan Raymond, an investment manager at Quilter Cheviot, warned that rising fuel and energy costs ripple through the wider economy, increasing business expenses and ultimately inflating the price of food and other goods.
He noted that this creates a difficult situation for central banks, as policymakers may face pressure to keep interest rates higher for longer or even raise them, which would negatively impact mortgage holders and borrowers.
The Bank of England has held UK interest rates at 3.75% during its last four meetings. Paul Dales, chief UK economist at Capital Economics, stated he believes the Bank will almost certainly hold rates again, though analysts remain hopeful that cuts could occur next year if energy price rises ease.
Meanwhile, the newly appointed chair of the US Federal Reserve, Kevin Warsh, told Congress last week that the central bank has no tolerance for persistently elevated inflation.
Despite pressure from former President Donald Trump to reduce borrowing costs, the Fed maintained US interest rates between 3.5% and 3.75% at Warsh’s first meeting last month, with the chair emphasizing his commitment to restoring price stability.
Md. Kazi Bijoy is a dedicated tech enthusiast and content creator with a passion for digital innovation. With years of experience in the tech industry, he specializes in breaking down complex topics into easy-to-understand guides. When he isn’t writing, he explores the latest gadgets and researches emerging trends in the digital world.