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(Bloomberg) — Prices at the pump for UK motorists soared by the most in four years in the last week, according to government data that revealed early warning signs of a cost-of-living squeeze caused by the Iran war.
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The average cost of a liter of unleaded petrol stood at 135.67 pence ($1.83) on Monday, up 3.5 pence from a week earlier to levels last seen in December, the figures published Tuesday show. Diesel prices rose 6.9 pence to 149.01 pence.
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It marked the biggest surge since 2022 when Russia’s invasion of Ukraine sparked an energy crisis. Brent crude climbed above $100 per barrel on Monday as the Iran conflict continued to disrupt production in the Middle East and trade flowing through the Strait of Hormuz.
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The data suggest households are facing a renewed squeeze on living standards with lenders also hiking mortgage rates in recent days on expectations that the Bank of England will be forced to delay interest-rate cuts. Economists have warned that UK inflation could hit 5% if the moves in energy markets stick.
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The surge at the pump may ultimately prove to be short-lived. Oil prices plunged below $90 per barrel on Tuesday morning after US President Donald Trump said the Iran war will end “very soon.”
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Prime Minister Keir Starmer has hinted at support for households should the turmoil on energy markets continue. “No matter the headwinds, supporting working people and their families with the cost of living is always top of my mind,” he said on Sunday.
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Nigel Farage, leader of the poll-leading Reform UK party, called on Chancellor of the Exchequer Rachel Reeves to reverse a plan to hike fuel duty, currently charged at 52.95 pence per liter. “We will spend the next few months trying to shame Rachel Reeves into cancelling it,” Farage and Reform Treasury spokesperson, Robert Jenrick, said in an op-ed in the Sun newspaper on Tuesday.
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In her budget in November, Reeves extended to September a pandemic-era 5 pence-per-liter cut in fuel duty. From then, it is due to be reversed in stages, with fuel duty uprated in line with inflation from April 2027.
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On Monday, Conservative Shadow Chancellor Mel Stride also urged Reeves to “urgently reconsider her decision to implement the first increase in fuel duty in 15 years.” Reeves batted the question away, saying she’d extended the longstanding freeze on fuel duty at two budgets.
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