Britons are bracing for higher petrol prices after oil prices surged due to the escalating conflict between Israel and Iran. Brent crude rose by 0.5% in early trading on Monday, approaching $75 a barrel, before falling 3.4% later in the day amid reports of potential ceasefire talks. The price of oil has climbed by about $10 a barrel in the past week, driven by fears of supply disruptions.
Economist Thomas Pugh of RSM UK warned that this could lead to a 5p increase in petrol and diesel prices at the pump over the next couple of months. The average petrol price on Monday stood at 132.1p per litre, a slight rise of a tenth of a penny, ending a three-and-a-half-month decline from 139.8p in early March. The AA noted that wholesale petrol costs remain lower than earlier in the year, but summer US gasoline demand is also a factor.
Iran, which accounts for about 3% of global oil supplies, has called on Qatar, Saudi Arabia and Oman to press the US to secure an immediate ceasefire. Israeli airstrikes targeted Iranian energy assets including the Shahran oil depot and the Shahr Rey refinery, raising fears for Iran's daily exports of 2 million barrels. Any disruption to tanker movements through the Strait of Hormuz, a key waterway for 20% of global oil and LNG supplies, would mark a significant escalation.
However, analysts suggested that other oil producers, such as Saudi Arabia and US shale producers, could offset any loss of Iranian exports. The FTSE 100 gained 0.4% on Monday, with shares in Shell and BP initially rising over 1% before falling back. Market analysts expect limited conflict for now, but warn that continued hostilities could impact global growth and inflation.
