Experts predict that the repercussions of “Trumpflation” could lead to an annual increase of at least £1,600 in expenses for some households in the UK.
The ongoing conflict between US President Donald Trump and Israel against Iran has already resulted in higher fuel and mortgage costs.
Energy suppliers are cautioning consumers about a potential surge in gas and electricity prices by £250 per year due to rising wholesale expenses. Additionally, there are concerns about escalating prices across various sectors such as air travel and retail.
TUC General Secretary Paul Nowak stressed the need for additional support to combat the impact of “Trumpflation” on living standards.
Energy bills
Support is being advocated to assist with energy bill payments.
While the current price cap by Ofgem provides some protection, concerns arise regarding future changes in the price cap, especially in July.
Energy UK warns that households could face a substantial £250 increase in annual gas and electricity bills by the end of 2026, reaching an average of £1,891. Urgent government intervention is urged to target assistance towards the most vulnerable customers.
Dhara Vyas, Energy UK’s chief executive, emphasized the importance of preparing for potential impacts on energy bills from the Middle East conflict.
The End Fuel Poverty Coalition estimates that around 13 million households may end up spending over 10% of their income on energy, with the poorest five million households facing even higher financial burden.
Simon Francis, coordinator of the coalition, highlighted the risk of another wave of fuel poverty due to the oil and gas price crisis resulting from the conflict in the Middle East.
Recent research from Age UK reveals that over a quarter of pensioners were already facing financial struggles, with energy costs being a major concern even before the Iran war outbreak.
Fuel prices
UK motorists are experiencing the impact of rising fuel prices at the pumps.
According to RAC, diesel prices have surged by nearly 20p per litre to 162.06p within a short period, while petrol prices have also increased by around 10p to 142.29p per litre. This hike translates to additional costs for regular drivers.
RAC’s Simon Williams anticipates that petrol prices should not exceed 148p a litre if oil remains at $100 a barrel. However, diesel prices are expected to continue rising towards an average of 170p.
Mortgages
Prospective mortgage borrowers are facing higher costs due to the spike in energy expenses leading to inflation expectations.
Moneyfacts reports a significant increase in fixed-rate mortgage rates, with the average two-year fix rising to 5.28% and the average five-year fix climbing to 5.32%. The reduction in available mortgage products further complicates the borrowing landscape.
Adam French from Moneyfacts alerts borrowers to potential volatility in the mortgage market amid the global economic impact of actions in Iran by the US and Israel.
Combined costs
The combination of higher diesel prices, increased mortgage rates, and projected energy cost hikes could add around £1,600 to the annual expenses of an average household. If diesel prices reach 170p as warned by RAC, the collective increase could rise to £1,827. Petrol drivers might face a combined cost increase of £1,308 annually, or £1,472 if unleaded hits 148p per litre.
These anticipated rises in expenses do not account for other potential cost escalations resulting from the conflict.
Other bills
While the impact on families is yet to be fully realized, concerns are raised about possible increases in various expenses.
The surge in jet fuel prices has sparked fears of airlines passing on the costs through higher fares, although no immediate changes have been observed. Shifts in holiday bookings indicate a preference for certain destinations over others due to economic uncertainties.
The Strait of Hormuz, a critical trade route, could indirectly affect food prices due to disruptions caused by the conflict. Econom