The U.S.-Iran war, which escalated in late February, continues to exert significant pressure on global fuel prices. Although a temporary two-week ceasefire was reached in early April — and later extended by the U.S. President Donald Trump on April 21 — the U.K., a major energy importer, remains highly sensitive to the initial energy shock stemming from the closure of the Strait of Hormuz.
In March, according to the Office for National Statistics, the inflation rate in the U.K. reached 3.3%. The surge from February’s 3% mark aligned with analysts’ expectations, representing the direct impact of Middle East tensions on domestic consumer prices. Economists warn that if the conflict is prolonged, inflation may continue to climb, surpassing the March figure and potentially reaching 4% this year. In this context, the pound dollar exchange rate slightly dropped toward the $1.35 zone.
Before the conflict began, the Bank of England was widely anticipated to start cutting the current 3.75% base rate, with inflation moving to the 2% target. However, with figures now rising, that outlook is shifting and the market is closely watching the upcoming committee meeting scheduled for April 30.
It is also worth noting that despite the ceasefire extension, there are no guarantees the conflict will end or that the economy will return to pre-war levels, hindering any immediate easing of the persistent pressure.
President Donald Trump announced his decision to prolong the ceasefire stating that Pakistan — mediating the negotiations — requested more time for Iran to present a unified proposal. Previously, talks were expected to take place in Islamabad with Vice President JD Vance leading the U.S. delegation. However, Tehran has confirmed neither its participation in these negotiations nor the extension of the ceasefire from its side.
The Strait of Hormuz has become the focal point of the conflict, directly influencing global oil exports. Current reports indicate that Iran has attacked three ships in the strait on the morning of April 22, seizing two of them, while the U.S. continues its naval blockade of Iranian ports. The reopening of the strait is now a central issue preventing a diplomatic breakthrough. Tehran has stated it will keep the passage closed until the U.S. lifts its maritime restrictions on Iranian trade.
Amid this persistent uncertainty, the U.K. economy is likely to face continued inflationary pressure, with the Bank of England expected to hold rates steady as it waits for more clarity on inflation dynamics.
This article was written in cooperation with TradingView