Motorists across Britain are being warned to prepare for higher fuel prices, as escalating tensions between Israel and Iran drive up global oil prices and raise fears of a broader disruption to energy supplies.
On Monday, oil markets reacted to growing instability in the Middle East, with Brent crude edging up 0.5% to $74.60 (£54.91) a barrel, and US crude rising 0.7% to $73.42.
This follows a sharp 13% jump last Friday, when prices soared after Israel launched strikes on more than 100 targets in Iran, including nuclear and missile facilities. Iran retaliated with missile attacks of its own.
Iran produces around 3% of the world’s oil, and any long-term disruption to its exports could have serious consequences for the global energy market.
According to Thomas Pugh, economist at RSM UK, the flare-up in the Middle East has emerged just as optimism had been building over stabilised trade relations between the US and China.
“The main impact on the UK economy will come through rising oil and gas prices,” Pugh explained, warning that the £10-per-barrel rise in crude prices over the past week could translate to an increase of 5p per litre at UK petrol pumps in the coming months.
As of Monday, petrol prices in the London area ranged from 128.9p to 131.9p per litre, while diesel stood around 134.9p, according to Petrolprices.com.
Despite heightened geopolitical risks, oil markets did not suffer a full-scale sell-off, and European stock markets opened relatively stable. The FTSE 100 gained 0.2%, with shares in energy giants BP and Shell up just over 1%. Markets in Germany and France also opened slightly higher.
Jochen Stanzl, chief market analyst at CMC Markets, said markets currently expect the conflict to remain contained, though there is little sign of a swift resolution. “Fighting is likely to continue at a limited scale this week,” he said.
Over the weekend, Israeli airstrikes targeted critical energy infrastructure in Iran, including the Shahran oil depot, the Shahr Rey refinery near Tehran, and the South Pars gas field. These attacks have raised concerns about a direct hit to Iran’s daily exports of 2 million barrels.
Energy analysts are also increasingly concerned about the strategic Strait of Hormuz, a crucial shipping route through which 20% of global oil and liquefied natural gas passes.
Any attempt by Iran to block or disrupt tanker movement through this vital corridor could send global prices soaring even further.
James Hosie of Shore Capital added that the spike in Brent crude could prove temporary—provided Iran’s key oil infrastructure remains largely intact.
