Inflation is expected to rise again as the conflict in the Middle East intensifies. The cost of living measure had been falling back towards the Bank of England’s 2% target before the US and Israeli began their air strikes on Iran.
Falling inflation had boosted hopes of more interest rate cuts this year, but analysts have “quickly changed tune” as rising oil prices caused by the conflict threaten to push up prices generally, said The Independent.
The war has “consequences that extend far beyond the Middle East”, said the BBC, as the region plays a “key role in global energy supplies and shipping routes”. That could mean higher inflation, pushing up heating bills and the cost of supermarket shopping in the UK.
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Save money on transport
“Drivers are continuing to feel the financial impact of the current conflict,” said the RAC. The average cost of unleaded petrol has risen to 139p per litre this week and diesel has reached 155p – the highest price since May 2024.
It may be worth trying to “cut commuting costs”, such as by sharing journeys, using public transport, cycling or walking, said Chase.
Consider fixing your energy bill
Wholesale gas prices are “spiking”, said MoneySavingExpert, which could push up UK energy bills. Those who are “risk averse” may want to choose a fixed-rate tariff now, said the website’s Martin Lewis, or if things settle, “there is always the chance fixes may get cheaper again soon”.
Consider your food shop
High energy and petrol prices also influence the price of fertilising crops, manufacturing and transporting products to supermarket shelves, said ITV. All of these make a difference to “how much our food costs”.
It is important not to panic buy, but you can save money by budgeting, looking out for coupons and special offers, said Chase. Non-perishable items such as rice, pasta and canned goods “often come with a lower per-unit cost when bought in larger quantities”.
Review your finances
The war in Iran and surrounding Gulf states is already pushing up swap rates, which is causing lenders to reprice mortgage rates upwards.
Average mortgage rates have increased to above 5% this week. So if you need to refinance or get a mortgage soon, you should “get your skates on”, said Claer Barrett in the Financial Times.
The conflict is also having an impact on financial markets, but rather than “watching your portfolio shrink on a smartphone app”, remember that you are investing for the long term and taking some investment risk can provide “the best chance of beating inflation”.
You can also “check how your savings are doing against inflation”, said Legal & General, as it may be time to switch as the rate rises, or if your returns “aren’t keeping up and are maybe even losing value”.