Inflation is expected to climb to 3. 3 per cent in the next official reading, and the timing matters: the first visible economic effects of the war in Iran are feeding through to British households through petrol, airfares and rent. The move would mark a step up from 3 per cent in February and could weaken hopes that price growth was settling into a calmer pattern. For the government and the Bank of England, the message is uncomfortable: energy shocks are still transmitting quickly into the domestic cost of living.
Why this matters now
The Office for National Statistics is due to publish the new consumer price index reading, and economists expect the jump to reflect March’s surge in energy-related costs. Market concerns are not limited to one item in the basket. City economists point to a jump in airfares and a sharp rise in heating oil prices, which are especially relevant for households in rural areas. At the same time, petrol is expected to rise by around 6. 5 per cent in March, while diesel is estimated to have climbed by more than 12 per cent. That combination makes inflation more than a statistical shift; it becomes a direct squeeze on day-to-day spending.
What lies beneath the headline?
The central issue is how quickly external shocks are feeding into domestic prices. Over the course of March, UK natural gas prices rose by as much as 50 per cent while Brent crude surged past $100 per barrel. Although oil is now closer to $95, the original spike has already created a lagged impact across transport and household costs. Goldman Sachs analyst James Moberly said higher consumer energy prices could add as much as 0. 4 percentage points to monthly inflation, with heating oil alone potentially contributing 8 basis points to headline inflation month on month. That matters because it shows how inflation can accelerate even when the initial market panic starts to ease.
There is also a second layer of pressure. Barclays chief UK economist Jack Meaning said a “greater than previously expected” rise in airfares would push price growth higher, with fares estimated to be up by as much as 14 per cent on the month. The bank linked that move in part to the timing of return flights around Easter travel. Mortgage interest payments are also expected to rise by 0. 2 per cent over the month, while rent is expected to creep up by 0. 4 per cent, leaving it 3. 6 per cent higher over the year. Together, those pieces suggest the inflation story is not just about fuel; it is about how several costs can move at once and reinforce each other.
Expert warnings and policy pressure
The Bank of England will be watching services inflation closely, because it is a key signal for persistent price pressure. That measure is expected to come in at 4. 4 per cent, above earlier forecasts. Fresh inflation data will arrive a day after labour-market figures from the ONS, giving policymakers another clue about whether wage growth may add to the pressure. The combination of higher wages and sticky services prices would complicate the case for relief, even if some energy spikes later ease.
Willem Buiter, an economist and former member of the Bank of England’s Monetary Policy Committee, said the breakdown of peace talks would likely mean the Strait of Hormuz is closed to commercial shipping, triggering a “significant further increase in oil prices”. He said Brent could reach $150 per barrel and even $200 if the blockade lasted beyond June 2026. Buiter also argued that if the government has strategic oil reserves, this would be the time to release them, possibly while rationing household allocations at prices below market levels. That view underlines a broader concern: once supply routes are threatened, inflation can become a policy problem as much as a market one.
Broader impact for the UK and beyond
The wider implication is that Britain remains exposed to geopolitical shocks it cannot control. The expected rise in inflation will likely intensify pressure on ministers already facing higher living-cost complaints, while also testing the Bank of England’s response if services inflation stays elevated. The risk is not only a short-term jump in the data; it is the possibility that repeated energy shocks make price stability harder to restore.
If inflation is now being shaped by oil, airfares and rent at the same time, how much room is left for policymakers to absorb the next shock?
