Bank of England is tipped to HIKE rates as soon as June as ‘Trumpflation’ batters Britain while the President threatens to ‘massively blow up’ huge gas field
As the Middle East war escalates, the British are preparing for the explosion of ‘Trumpflation’ today.
Iran’s strike on a large Qatar gas field in response to the Israeli attack and the rapid rise in oil and gas prices frightened the markets. Oil refineries in Kuwait were also burning due to other attacks this morning.
Donald Trump has threatened to ‘massively blow up’ Tehran’s facilities if neighboring Arab countries target more of their infrastructure.
And the Bank of England will give mortgage payers a taste of the misery that will come at noon. interest rates is set to be put on hold.
There were widespread hopes of a rate cut just two weeks ago, but now traders are warning of a 60 percent chance of a rise in June.
Pump prices are already rising in the UK and it looks almost certain that the energy price cap will rise significantly when the protection expires in July.
Tehran has effectively closed the Strait of Hormuz, through which one-fifth of the world’s oil supplies pass, with no clear timeline for reopening the canal.
Analysts will take the remarks of BoE Governor Andrew Bailey into account in his assessment of the risks to the UK economy.
Higher rates will weaken an already faltering economy; Today’s official figures show unemployment remains at 5.2 per cent, a five-year high, and youth unemployment remains at 14.5 per cent – a level not seen since early 2015.
On a day when there is chaos in the Middle East and the world:
- Gas prices in the UK rose by a fifth this morning following the devastation at some of the region’s biggest refinery sites;
- Mr. Trump suggested the United States could simply walk away rather than try to reopen the Strait of Hormuz, arguing that America is energy independent despite being affected by global prices;
- Trade secretary Chris Bryant risked inflaming transatlantic tensions by claiming Mr Trump ‘didn’t know what he was doing’ and that it was ‘clear’ Iran would close the Strait;
Iran’s strike on a large Qatar gas field in response to the Israeli attack and the rapid rise in oil and gas prices frightened the markets.
Two Kuwaiti oil refineries are on fire today after Israel attacked Tehran’s largest natural gas field and Iran launched new drone attacks on the energy infrastructure of its Gulf Arab neighbors.
Authorities said a strike at the Mina Al-Ahmadi oil refinery, one of the largest oil refineries in the Middle East, caused the fire, while the Kuwait Oil Company later confirmed that the Mina Abdullah Refinery in the south of the country was also hit.
Meanwhile, a ship off the coast of Qatar was also hit by a shell, and firefighters were fighting a fire at a large LNG facility following Iranian attacks.
Gas prices in Europe have increased by over 30 percent due to fears of $200-per-barrel oil and years of economic negativity.
Stream of consciousness Accuracy In his social post, Trump claimed that the United States was unaware of Israel’s attack on the South Pars Field and warned that the United States would take unprecedented action if Tehran continued to strike energy fields in the Gulf in retaliation.
“I do not want to allow this level of violence and destruction because of the long-term consequences it will have on the future of Iran,” he said in a post on Truth Social, adding that he “will not hesitate” to respond.
Before the crisis broke out, the BoE was predicting this headline CPI inflation It could approach the 2 percent target by April.
But this is looking increasingly unlikely given the possibility that higher wholesale prices will lead to higher household electricity and fuel costs.
Undersecretariat of Treasury Budget The liability watchdog has warned that a one percentage point could be added to UK inflation this year if current energy price increases continue.
Last night, the US Federal Reserve had kept the interest rate steady at a range of 3.5 per cent to 3.75 per cent since December despite intense pressure from Mr Trump.
Fed Chairman Jerome Powell said the future path will depend on whether inflation continues to decline.
‘We don’t know what the effects of this will be, and in fact no one does,’ he said.
Wealth Club’s Susannah Streeter said ‘the knock-on effects of higher energy prices will have toxic repercussions around the world’.
‘The Bank of England’s Monetary Policy Committee is meeting in this turbulent environment and looks almost certain to keep interest rates steady given the inflationary risks posed by the conflict.
‘Not only will the headline CPI rate be likely to rise due to higher fuel and energy bills, but there will also be concerns that companies will pass on rising costs through higher prices on a range of goods and services.
‘Loosening food prices are at risk of rising again due to increased freight costs and disruption of fertilizer exports from the Middle East.
‘There are also concerns about stranding supplies of helium, a key ingredient in semiconductor manufacturing; This can lead to delays in the production of electronic goods and even cars.
‘Traders are now betting more that the Bank will have to raise interest rates by the end of the year; ‘This means a sharp reversal in policy – just as debtors hope for relief.’
Joe Nellis, economic adviser at accountancy firm MHA, said: ‘Interest rates are unlikely to fall anytime soon and may even rise again.
‘The Bank has a difficult balancing act on its hands, knowing that raising interest rates could hinder economic growth. But its main priority will always be to stabilize prices. ‘Policymakers will not be afraid to raise interest rates if necessary to prevent inflation from rising further.’
Nellis said: ‘The rapidly escalating crisis in the Middle East has exposed a new and potentially strong inflation risk.
‘Oil and natural gas prices have increased significantly in global trading markets; This reflects concerns about potential disruptions to supplies and key shipping routes. If these increases continue, the impact could quickly translate into higher transportation costs, increased manufacturing expenses, and more expensive home energy bills.
‘The bank will be willing to be at the forefront in the fight against inflation. Policymakers at the Bank, as well as central banks around the world, have been criticized for being too slow to act as global inflation began to rise in 2021-22.’
Trump’s successor at the helm of the Fed, Kevin Warsh, will face the tough task of responding to inflation fears brought on by the war as the president pushes for cuts.
Gasoline and oil prices are increasing rapidly UK homebuyers are already being hit as mortgage lenders stop offering the best deals.
Markets currently see a 60 percent chance that the Bank of England will raise interest rates from 3.75 percent to 4 percent in June. And the chances of any outages next year have fallen to almost zero.
Interest rates are almost certain to remain steady at today’s meeting of the Bank’s Monetary Policy Committee (PPC). Before the war, the MPC was expected to reduce interest rates.
The minutes will be examined to determine what impact the conflict will have on the future path of interest rates.
Figures from Moneyfacts show the average two-year fixed mortgage deal is at 5.3 per cent, the highest since February last year.
The annual cost of a typical two-year fix is now £788 higher than it was two weeks ago for a £250,000 25-year loan. At 5.35 percent, the five-year average correction is the highest since August 2024.
Almost all of the 500 deals below 4 per cent available last week have been withdrawn, Moneyfacts said.
Adam French, head of consumer finance, said: ‘The financial effects of ‘Trumpflation’ are taking hold as the conflict in Iran raises inflation concerns.
This has forced markets to rethink the outlook for disruptions, causing borrowing costs to rise and lenders to pull and reprice deals.
‘The window for highly competitive rates below 4 per cent was quickly closed.’
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