British motorists are bracing for higher petrol prices after a surge in oil costs triggered by the escalating conflict between Israel and Iran. Brent crude rose by 0.5% in early trading on Monday, pushing towards $75 a barrel, before falling 3.4% later in the day amid reports of potential talks to end hostilities. The volatility comes as Iran, which accounts for about 3% of global oil supplies, launched missile strikes on Israel after Israeli attacks on Iranian nuclear and missile sites.
Economist Thomas Pugh of RSM UK warned that the price rise could add 5p to a litre of petrol and diesel over the next couple of months. The average petrol price stood at 132.1p a litre on Monday, up slightly from recent lows, ending three and a half months of falling prices. The AA noted that wholesale petrol costs remain below levels seen earlier this year, but the conflict risks reversing the trend.
Iran has reportedly sought mediation from Qatar, Saudi Arabia and Oman to press the US president for a ceasefire. However, analysts caution that further escalation could disrupt tanker movements through the Strait of Hormuz, a critical waterway for 20% of global oil and LNG supplies. Such a move would impact exports from Saudi Arabia and other Gulf producers, potentially driving prices higher.
Stock markets showed limited reaction, with the FTSE 100 gaining 0.4% and shares in Shell and BP initially rising before falling back. Analysts at Shore Capital suggested the oil price spike could be temporary if Iran's oil facilities remain largely unaffected, while Opec members like Saudi Arabia could increase production to offset any disruption.
