Oil prices have surged to four-week highs following renewed US-Iran tensions, with Brent crude jumping 4.55% to $87.08 a barrel, the highest since the ceasefire on 17 June. The US reimposed a naval blockade on Iran, and President Donald Trump declared the ceasefire over last week, though talks remain open. West Texas Intermediate also rose to $81.25 a barrel.
Analysts warn that if disruptions continue, oil prices could stay in the $85-$90 range, keeping energy costs elevated for UK households and businesses into next year. Natural gas prices have also increased, adding to inflationary pressures.
UK government borrowing costs have risen, with the 10-year gilt yield climbing above 5%. This follows a period where US inflation cooled to 3.5% in June due to the temporary ceasefire, which has now ended. Higher borrowing costs could impact mortgage rates and government spending.
The combination of rising energy prices and higher borrowing costs suggests that UK prices are likely to remain high until at least 2025, as the Middle East crisis continues to affect global markets.
