How will UK petrol prices be affected by US-Iran war and rising cost of oil?
Motorists in the UK could face record-breaking oil prices as soon as this month as the conflict between the US and Iran takes a toll on oil markets around the world.
Conflicts spread across the Middle East after the US and Israel attacked Iran on Saturday, followed by retaliatory Iranian attacks on targets in the United Arab Emirates (UAE), Qatar, Bahrain, Jordan and Iraq.
As America and Israel continue airstrikes on Iranian targets, explosions continue to be reported across the region. The country’s religious leader Ali Khamenei was killed in a targeted attack on Saturday and top officials have vowed not to negotiate with the United States.
Follow The Independent’s live feed for the latest updates
As the conflict escalated, Iran warned that it would “set fire” to any ships attempting to pass through the Strait of Hormuz, a key shipping channel for the global oil industry.
It was reported that at least three ships were attacked near the Bosphorus over the weekend, which threw the markets into turmoil.
The strait provides the only passage from the Persian Gulf to the open ocean, making it a crucial point for the oil industry. Approximately 20 percent of the world’s gas and oil is transported by water.
However, Iranian general Serdar Jabbari said the country would no longer “allow even a single drop of oil to leave the region”, effectively bringing international shipping to a halt at the entrance to the pass.
The Bosphorus is located on the sea strip between Iran in the north and Oman and the UAE in the south. Iran has hit American-linked targets in the UAE cities of Dubai and Abu Dhabi in recent days, meaning missiles may continue flying over the strait.
What does this mean for UK oil prices?
Brent crude, the global benchmark for oil prices, rose more than 10 per cent to $82 (£61) a barrel on Monday. The rate was already at a seven-month high before Saturday’s attack, reaching $73 (£54) a barrel.
The figure currently stands at $81.82 (£61.52) per barrel on Tuesday.
Experts warn this figure is likely to continue rising as a protracted conflict has the potential to create record price rises in the UK.
AA chief Edmund King warned that serious disruption to oil trade could lead to this situation within the month.
“The turmoil and bombings in the Middle East will certainly be a catalyst that will disrupt global oil distribution, which will inevitably lead to price increases,” King said. Times.
“So drivers be careful, we could see record prices at the pumps in the next 10 to 12 days.”
The planned increase in fuel duty, following a 5p per liter cut in March 2022 in response to Russia’s invasion of Ukraine, is creating further difficulties for drivers.
Rachel Reeves announced a reversal of this policy in the November Budget; It started with a 1p increase in September this year, followed by a 2p increase in December and finally a 2p increase in March 2027.
Some experts have urged the chancellor to delay the change because of the conflict, arguing it would bring greater security to rising prices.
FairFuelUK founder Howard Cox said: “In light of the ongoing crisis in the Middle East, Rachel Reeves should announce in her Spring Statement that fuel duty will be frozen for the duration of parliament and cancel any planned increases in the Autumn Budget.
“This move will not only be economically prudent (promoting GDP growth and easing inflationary pressure), but will also provide much-needed political relief to this government known for frequent U-turns.”
Petrol prices currently average 132.9p, according to the AA. The auto giant added that market volatility after the 5-point cut was booked could push it to 142.5 points, equal to the highest level recorded before the pandemic.
Professor Michael Tamvakis, professor of commodity economics and finance at Bayes Business School (part of City St George’s, University of London), said: “Closing the Strait of Hormuz is a significant bottleneck for the flow of both oil and gas. In short, we could lose around six million barrels a day of the 14 million barrels exported by GCC (Gulf Cooperation Council) countries.”
“If the Strait of Hormuz remains closed for a long period of time and there is no insurance for ships passing through the area, we face an increasing supply bottleneck.”
“The shutdown… also completely blocks natural gas supplies from the Middle East and the Gulf region. There is no pipeline alternative. It is primarily routed to Asia, but some of Qatar’s natural gas is exported to Europe. We are lucky to be entering the Northern Hemisphere spring. This decline in demand could ease any pressure and price increases.”
