Britain’s economy is bracing for a fresh shockwave as the escalating US-Israeli military campaign against Iran triggers a cascade of financial aftershocks across the UK. Petrol prices have surged by 7p per litre in the last fortnight alone, pushing the average cost of a gallon to £1.58—the highest since October 2022—according to fuel price tracker RAC. Motorists in London and the Southeast face the steepest increases, with some forecourts charging £1.65 or more for unleaded. The spike coincides with a sudden jump in wholesale gas prices, which climbed 18% this week after Iran-backed Houthi rebels launched missile strikes on Saudi Arabia’s East-West Pipeline.

The Treasury’s newly updated economic risk register, classified as “amber-urgent,” predicts that the turmoil in the Strait of Hormuz could push the UK’s inflation rate above 4% by August unless oil supplies stabilise. Chancellor Rachel Reeves has convened an emergency meeting with Bank of England governor Huw Pill and energy secretary Ed Miliband for Thursday to assess the fallout. Sources say the government is preparing to release strategic oil reserves to stabilise prices, a move last deployed during the 1990 Gulf War.

Mortgage borrowers are also feeling the heat. The average two-year fixed rate has climbed to 5.89%, up from 5.62% last month, according to Moneyfacts data. Lenders including Halifax and Nationwide have withdrawn nearly 500 mortgage products in the past week, citing “volatile funding markets.” First-time buyers face the steepest impact, with the average five-year fix now priced at 6.12%, squeezing affordability further as household incomes stagnate.

The Bank of England’s Monetary Policy Committee is under pressure to delay its next interest rate cut, originally slated for June, as markets bet on a prolonged tightening cycle. Economists at Capital Economics warn that if the conflict persists, UK GDP growth could drop to 0.9% in 2025, down from the OBR’s 1.2% forecast. Meanwhile, the Home Builders Federation reports a 12% fall in new housing starts this quarter, citing rising material costs linked to energy price volatility.

Energy-intensive industries are sounding alarms. Tata Steel confirmed it will idle one of its blast furnaces at Port Talbot for two weeks starting June 10, blaming “unsustainable” gas prices. The company employs 4,000 workers in Wales, where the steel sector contributes £1.6 billion annually to the local economy. Unite the Union has called for government intervention, warning of mass redundancies if energy costs remain elevated.

Retailers are also tightening belts. Tesco and Sainsbury’s have delayed non-essential store refurbishments, while Marks & Spencer has frozen expansion plans in the North West due to “unpredictable supply chains.” The British Retail Consortium reports that food price inflation has ticked up to 3.4% year-on-year—the first rise since December 2023—driven by transport and energy costs. The sector employs 3.2 million people across the UK.

• 📊 Food price inflation climbs to 3.4%—first rise since December 2023
• 🔍 12% drop in new housing starts this quarter linked to material cost volatility
• ⚠️ Tata Steel to idle Port Talbot furnace for two weeks starting June 10

The crisis has reignited debates over the UK’s energy security. Labour MP Jess Phillips, chair of the Business and Trade Committee, accused the government of “sleepwalking into another supply shock” by failing to accelerate renewable energy projects. “We cannot keep relying on the Strait of Hormuz for our fuel,” she said. The government’s own Net Zero Strategy sets a target of 95% renewable electricity by 2030, but only 42% of the 2025 capacity pipeline is currently funded.

1. Emergency meeting scheduled — Chancellor Reeves, BoE governor Pill, and energy secretary Miliband to meet Thursday
2. Strategic reserves under review — Treasury considering release of oil stocks to stabilise prices
3. Legislative push expected
4. — Phillips calls for accelerated renewable energy funding and grid upgrades