How the Iran war affects your money and bills

ShareSaveAdd as preferred on GoogleKevin PeacheyCost of living correspondentGetty ImagesFrom petrol prices to mortgage rates, the US-Israel war with Iran has already had an impact on people's finances in the UK. Hopes of a lasting deal to end the war have risen, but the political situation can change quickly as too can the effect on personal budgets. Here are some of the areas to watch out for. Drivers have noticed that prices at the pump have jumped since the war began, but have since dipped from their peak. Crude oil is a key ingredient in petrol and diesel, meaning higher wholesale costs make filling up a car more expensive. Since the war began, that wholesale price has been volatile as the production and transportation of energy across the Middle East has been disrupted. According to the RAC, the price of petrol reached an Iran war peak of 159.53p a litre on 28 May, while diesel's highest price was 191.54p a litre on 15 April. The latest data shows petrol was marginally under 157p a litre, and diesel just under 178p, with the RAC expecting further falls. It now costs £97.22 to fill up a 55-litre family car with diesel – £18.91 more than it did on 28 February, and £85.74 for a tank of petrol – £12.68 more than at the start of the conflict. Transporting oil is a slow process, so price movements in the wholesale markets take about a fortnight to show at the pump. It also means that, were the Strait of Hormuz to reopen, it will take some time for oil - and economic activity - to flow freely again. Fuel retailers have denied accusations of price gouging during the conflict and the regulator has said there is no evidence of widespread attempts of profiteering. Higher petrol prices can also carry through to increased prices for goods and services. For example, if transport costs for supermarkets rise that could then be reflected in the cost of food. Before the war began, there had been a hope and expectation of a steady fall in the interest rates charged on new, fixed mortgages, as well as lower variable rates. However, the situation has proved to be much more volatile. Lenders raised rates quickly, due to their own funding costs rising and an expectation that the base borrowing rate would not fall as previously anticipated. The average two-year fixed rate jumped from 4.83% at the start of March to a peak of 5.90% on 12 April, according to the financial information service Moneyfacts. It has since dropped to 5.61% as of mid-June. For those looking for a five-year deal, the average rate rose from 4.95% to a peak of 5.78%, and has since dipped to 5.58%. As a result, many face higher repayments than they might otherwise had planned. The Bank of England says that over the next three years, average monthly payments for those moving on to a new deal are expected to rise by approximately £80. That is an average and there could be considerable variation. About 53% of UK mortgage holders are expected to see their payments rise, the Bank says, but around 25% of those who fixed at higher rates should see their payments fall, despite recent increases in rates. There is some protection in place for household gas and electricity bills, thanks to the price cap in England, Wales and Scotland set by energy regulator Ofgem. However, it is time limited and does not cover everyone. The maximum price for each unit of energy, for those on variable deals governed by the cap, is set until July. However, in July prices will rise by 13% as the higher wholesale costs, faced by suppliers, feed through to bills. Under Ofgem's price cap for July to September, a dual-fuel household using a typical amount of gas and electricity would pay about £18 a month more for energy - driven by a considerably higher charge for gas. The last time there was a particular spike, following Covid and Russia's invasion of Ukraine, the government had to step in to help with the Energy Price Guarantee (EPG). The chancellor has said there could be government support if needed for bills at the start of winter but, unlike the EPG, it would be based on household income and targeted at those who need it most, rather than universal. As yet, prices from October onwards are highly uncertain, although the current situation suggests they may not rise at all. The most immediate impact of rising prices was felt by those who use heating oil, often stored in a tank outside their property. There is no cap that limits the cost. Heating oil is used widely in rural areas and in Northern Ireland. In March, Prime Minister Sir Keir Starmer announced support amounting to £53m for the most vulnerable users of heating oil. The money will be distributed via the devolved authorities. In England, councils will decide who qualifies and how they will receive the financial help. Competition authorities are also checking whether heating oil customers are being treated fairly. At the start of March, UK inflation – which charts the rising cost of living – was fo

How the Iran war affects your money and bills

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How the Iran war affects your money and bills

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