From energy bills to petrol prices and even mortgages – these are the seven ways the conflict in Iran could hit your personal cost of living
As tensions rise and attacks continue, gas and oil prices have surged causing concern for consumers of rising bills.
Global stock markets have also been hit, impacting investments and pensions, and there are fears of a knock-on effect of rising inflation and higher interest rates.
Yet experts have warned people not to panic and they say if the conflict is short lived, consumers may be protected from many of these expected price rises.
Here we look at exactly what’s happening, how it could impact our personal finances, and some of the ways you can protect yourself from rising costs.
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What’s happening in the Middle East?
In the past week strikes have been launched at Iran by the US and Israel and the country’s Supreme Leader, Ayatollah Ali Khamenei, was killed.
In response, Iran retaliated with attacks on Israel and US-allied states in the Middle East including Qatar, Bahrain, Jordan, the United Arab Emirates (UAE) and Kuwait.
Attacks have now spread to Cyprus and Lebanon and there is currently no sign of the conflict slowing or stopping, while shipping lanes and airspaces have been threatened.
Since Saturday, when the conflict began, there has been a big knock-on effect on the global economy. There has also been a stream of headlines warning of shock price rises in the UK for consumers, similar to those seen following the start of the war in Ukraine.
How are prices going to rise?
Many different aspects of our finances could be impacted by the conflict in the Middle East, however as it is still very early days it’s impossible to predict exactly how the cost of living may rise.
Here we look at some of the expected rises, and offer some solutions to help you to protect yourself from these increasing costs.
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1 – Petrol prices
Oil prices have risen following and Iran has told vessels not to pass through the Strait of Hormuz, which around 20% of the world’s oil and gas passes through.
On Monday the price of Brent crude oil, which is used to make petrol and diesel, rose to $82 a barrel, the highest figure seen since January 2025, yet experts say there’s no need to panic and prices are still cheaper than a year ago.
Luke Bosdet, spokesperson for the AA, said: “Wholesale costs had been increasing even before the weekend’s strikes on Iran. However, pump averages today are still below where they started the year and petrol is almost 6.5p a litre cheaper than this time last year. That makes a tank of petrol more than £3.50 cheaper than in early March 2025.”
To make a significant impact, prices will need to rise further and stay that way, according to Simon Williams, head of policy for the RAC.
He said: “If oil were to climb to and stay at the $80 a barrel mark, then drivers could expect to pay an average of 136p for petrol. At $90, we’d be looking at over 140p a litre and $100 would take us nearer to 150p, but it’s all too soon to know.”
While there’s nothing we can do about rising prices, there are lots of ways to save money on petrol and diesel. Our guide to saving money on petrol and diesel has full details on how to drive down your fuel costs.
2 – Energy prices
Just a week after we learnt that energy bills will fall by 7% on average, to £1,641 a year, there are fears the Middle East conflict will force Ofgem to increase the Energy Price Cap from July.
Gas prices rose 50% following the start of the conflict, and the Resolution Foundation has predicted that if recent rises continue, they could add £500 to average energy bills.
While there’s no certainty that prices will rise, it’s well worth checking to see if you’re on the best energy tariff for you. The Energy Price Cap refers to standard variable tariffs and it was brought in to protect consumers from price spikes.
But there are fixed-rate energy tariffs which set the price you pay for energy, despite what might be going on with oil and gas prices worldwide. If you are able to find a fixed-rate energy deal which is cheaper than the Energy Price Cap, it may be worth switching to this now, to lock in your energy prices over the period the price is set for.
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3 – Mortgages
Mortgage rates and the cost of borrowing may rise as a result of the Middle East conflict. We need to look at a few different measures here which impact mortgage rates.
Gilt yields, which also determine the price of mortgages, have increased. This pushes up the cost of borrowing for lenders, and this could be passed onto consumers.
Swap rates, another key factor to calculating the cost of lending, have also been rising sharply and some mortgage lenders have already paused or reconsidered plans to lower interest rates.
Adam French, head of consumer finance at Moneyfacts, said: “Because fixed mortgage pricing is closely linked to swap rates, this sudden market movement risks halting the recent momentum towards lower mortgage rates just as borrower confidence had begun to build ahead of an anticipated rate cut.
“It serves as a stark reminder that mortgage costs are not driven solely by domestic policy decisions. Global geopolitical events move markets, markets move swap rates, and swap rates ultimately shape the deals available to borrowers – all while the world watches deeply troubling events unfold.”
4 – Interest rates
Higher energy prices, including gas, electricity and petrol, can all impact the UK rate of inflation. If prices remain high, they may push up inflation, leading to higher prices for UK consumers.
Inflation has been steadily falling since the highs of 2022 when it reached 11.1% during the cost-of-living crisis, but if the conflict continues it may derail this.
Higher inflation means we have less money to buy things than we previously had and it is not good news for consumers. It leads to rising costs and everyone having less money to meet these costs.
Inflation is closely watched by the Bank of England, and to its general response to seeing rising prices is to increase the base rate. The idea is to encourage saving and discourage borrowing, taking money out of the economy and putting pressure on shops to keep prices low. It also puts pressure on businesses to keep their costs low.
In theory, this will limit price rises and pay rises and stop us falling into a spiral of higher and higher prices erroding savings. But in reality, base rate hikes are seldom good news for people with mortgages or other debts while savers benefit.
5 – Rising shopping and grocery costs
Increasing inflation pushes up the cost of everything we pay for, but global conflicts can have a direct impact on the price we pay for certain goods too.
At the start of the Ukraine war, for example, the cost of sunflower oil shot up as Ukraine is where most of it is produced.
If supply chains are continually disrupted, this could impact the goods the UK imports, leading to a shortage in supply and rising prices.
Worse, rising energy bills can impact everything from food prices to appliances and cars – as energy is used to help grow food as well as in manufacturing.
Lindsay James, Investment strategist at Quilter, said: “The worrying element is this conflict has the potential to escalate further, damaging global trade and making the shipment of goods and commodities more difficult.
“Shipping companies already seem to be pre-empting that potential threat by diverting round Africa as a result, so cost inflation will start to kick in on all imported goods to Europe from Asia in days to come.”
6 – Investments and pensions
Global stock markets have fallen as a reaction to the conflict, while some specific stocks including airlines, banks and events companies have also fallen this week.
If you have investments such as a stocks and shares ISA or a pension and you’ve seen these dip this week, you may be worried about the overall value of your funds.
However, investing is designed for the long term, especially when it comes to pensions, and unless you’re very close to retirement short-term shocks should not have a huge impact on your pension.
Daniel Casali, chief investment strategist at Evelyn Partners, said: “Periods like this are uncomfortable, but they are not unfamiliar. We have seen similar episodes — most recently during prior Israel–Iran tensions and in the 2022 energy shock.
“At this stage, this is not a systemic market event. We are not seeing disorderly trading conditions or liquidity stress. For now, the appropriate stance for investors is calm, disciplined and long-term. Periods of geopolitical tension are unsettling, but diversified portfolios are designed to navigate precisely these environments.”
7 – Holidays
Millions of people who are currently abroad, or those with holidays booked, may also be impacted by the conflict.
Your rights if you’re stuck abroad and need to get home
For those people who are currently abroad in an area affected by the conflict, you will need to contact your holiday company or airline. The situation is changing all the time so this is the best way to get the most up-to-date advice.
Many flights have been cancelled but the airline will be able to provide the best advice while if you’ve booked through an agent you will need to contact it.
What happens if you have a flight booked and need a refund
You may be able to get a refund or to rebook a flight or holiday if you’re now no longer able to travel because of safety reasons.
The Foreign, Commonwealth and Development Office (FCDO) has updated its advice about which countries are safe to visit. If you travel to one of the countries it has warned against visiting, this will invalidate your travel insurance so if you need to claim, you won’t be able to use it.
If you have a package holiday booked, you may be able to get a refund or a chance to rebook the trip. If you have booked the holiday yourself (not through a package) you will need to contact the companies you’ve booked with to request a refund or to rebook. You can also contact your travel insurance provider for help.
