The grim scale of the financial impact of the Iran war on UK households has been laid bare, with energy bills set to soar by more than £221 a year from July.
The rise in Ofgem’s price cap – the largest since 2023 – has been triggered by global energy markets being thrown into turmoil following the US and Israel’s attacks on 28 February.
Britons are now being squeezed from all angles as the Middle East conflict shows no sign of abating.
Global oil and gas prices have surged, motorists are forking out around £15 more at the pump, and food bills are soaring. Britons are also facing significantly higher mortgage costs, while businesses are being lumbered with a raft of price hikes.
Experts are warning that the cost of living crisis is only set to get worse, with painful energy price rises due to hit in October, when demand increases ahead of winter.
Commentators have repurposed the term “Trumpflation” – originally coined by economists concerned about the inflationary potential of Donald Trump’s economic policies – to describe the impact the war is having on Britain and around the world.
Trades Union Congress (TUC) general secretary Paul Nowak said: “Painful energy price rises are coming down the track – and working people are already feeling the pinch with fuel costs rising because of Trumpflation. The longer this war goes on, the greater the threat to working people.”
Here, The Independent takes a look at how UK households are paying the cost of Trump’s war.
Rising energy bills and oil prices
Energy bills are set to rise by 13 per cent to £1,862 from July, costing a typical household in Britain an extra £221 a year.
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Costs have been sent rocketing higher by Iran’s move to block the crucial Strait of Hormuz shipping route, through which a fifth of the world’s oil and gas is carried. Last month, oil hit a high price of $126 a barrel. It now sits just under $93 compared to before the war, when it traded around the $65-70 range.
The price cap surge will be a major concern for households, largely because there’s only a limited amount people can do to reduce the amount of electricity or gas they use.
Fixing your tariff ahead of time and using price comparison websites are two ways that households can try to limit the impact of the rise. Consumers can also move off variable pricing deals, which can leave them exposed to further rises.
Cornwall Insight’s forecasts suggest the next cap in October will be at a similar level to July, even if the Middle East conflict were to end soon, because of the physical damage to infrastructure and the lingering effect of disrupted supply.
Ofgem chief executive Tim Jarvis said the price change “reflects continued volatility in global energy markets”. Energy secretary Ed Miliband said the rise was “because of a war we did not choose”.
Petrol prices
On Tuesday, it emerged that petrol pump prices had hit a new high since the Iran war began.
The average cost of a litre of petrol was 159.43p – that’s 26.6p more expensive than on 28 February.
The RAC says the cost of a 55-litre tank of petrol for an average family-sized car now costs £87.69. That’s up a total of £14.63 compared to before the war started – a rise of 20 per cent, or one-fifth.
It’s even worse for diesel car owners: with a litre now costing 185.5p, the price of filling your tank is a whopping £102.02.
However, the wholesale price of petrol has recently fallen, with consumer groups hopeful it will soon be reflected at pumps – though some companies have been criticised for being too quick to raise prices and too slow to lower them again.
Heating oil
Meanwhile, heating oil – derived from a different product and thus a different pricing market to the oil used for car fuel – still sits 50 per cent higher than its pre-Iran war price, despite having come down from earlier shocking highs.
The mechanics of that market mean price changes are felt more quickly by homeowners – both going up and coming back down – as seen by the price surging from around 60p per litre in mid-February, to a high of 134p just one week into March.
That equated to a rise of more than 120 per cent in little more than a week, leading to some customers being unable to get a fixed price for a refill of their tanks until the day of delivery.
On 27 May, heating oil has fallen back to 90p per litre, continuing a gradual descent which began in early April.
Food shop
At the start of April, the Food and Drink Federation (FDF) warned grocery costs could surge by as much as 10 per cent across 2026, mostly as a result of increasing energy costs. There are also lingering concerns over higher fertiliser prices, another commodity that is regularly shipped through the Strait of Hormuz.
Unfortunately, while petrol costs are fluctuating up and down, the same is unlikely to be true for food prices, says the Energy and Climate Intelligence Unit (ECIU).
The data showed that, on average, shelf prices fell by only 1 per cent of the original price rise after six months and by only 5 per cent a year after the price shock.
“Shoppers feeling that prices are on a never-ending escalator upwards is borne out by the data,” Chris Jaccarini, food and farming analyst at the ECIU, said. “War and extreme weather are increasingly pushing up the cost of the weekly shop, with the latest conflict in the Middle East driving up the price of oil, gas and fertiliser used to grow, ship and process food.”
Analysis has shown that a typical annual household shopping bill could rise by £588.
Henry Dimbleby, former lead of the government’s National Food Strategy, described food inflation as “brutal” – and warned it will “keep biting unless we tackle the underlying causes”, including reliance on fossil fuels and a lack of resilience in food production.
Recent data also showed the cost of British favourite fish and chips has almost doubled since 2019, with the price of cod and haddock rising on the back of wars in Iran and Ukraine, and oil prices also spiralling this year.
Interest rates and mortgages
A longer-term knock-on effect could come with rising prices – in other words, inflation – leading to the Bank of England voting to raise interest rates in an attempt to stop them spiralling even higher.
So far this year, the BoE has held firm at 3.75 per cent, but there remains a real possibility that it will be lifted back to 4 per cent, or even higher, later this year.
Mortgage rates have already shot up as the market behind them reacts sensitively to the prospect of interest rate changes.
Moneyfacts data shows that, compared to 28 February, the interest rate on an average two-year residential fix is up 0.89 percentage points, from 4.84 to 5.73 per cent.
Data from Finder shows the average UK residential mortgage in 2025 had around £137,500 outstanding.
As an illustration of how much of a real-terms increase those percentage changes make, this type of mortgage with 20 years left would see an increase of more than £68 in monthly repayments, or £821 across the full year.
Five-year deals, meanwhile, are up 0.7 percentage points, from 4.96 per cent pre-war to 5.66 per cent today. Average two-year deals did briefly peak at 5.9 per cent in early April, while it was a 5.78 per cent peak for a five-year fix.
Rachel Springall, finance expert at Moneyfacts, encouraged homebuyers or those seeking a renewed deal to get expert advice.
“Fixed mortgage rates have fallen since their peaks witnessed back in April, but they are still much higher than they were at the start of March,” she said.
“While it has been a quiet week for rate moves, it is still an essential time for borrowers to seek advice to navigate the mortgage maze if they need a new deal.”
AJ Bell’s Sarah Coles, head of personal finance, urged those with upcoming renewals to act early and secure the best deal possible to prevent unexpected repayment hikes.
“The price cap rise in July will also feed through into inflation figures. The Bank of England is tasked with keeping inflation at 2 per cent, which is why the market has been pricing in two interest rate rises by the end of the year,” she said.
“It’s worth shopping around for a new fix as soon as you have six months left to run on your fixed rate deal. If mortgages get cheaper, you can find a better deal, but if they’re pricier, you’ll have locked in a relative bargain.”
