31 March 2026 Diesel price is almost £2.00 per liter in Long Stratton, UK.
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Inflation in the UK rose to 3.3% in March as fuel prices soared due to the Iran war, according to provisional data released by the Office for National Statistics (ONS) on Wednesday.
Economists polled by Reuters had expected inflation to accelerate to 3.3% from 3% in the 12 months to February. Latest data provides first hard evidence of the impact of the Iran war on UK consumer prices
ONS chief economist Grant Pitzner said on Wednesday that the rise in inflation was mainly due to higher fuel prices, which were the biggest rise in more than three years.
“Along with rising food prices, airfares were also a factor in the increase this month,” he wrote in a post on X.
“The only significant offset was clothing costs, where price increases were lower than they were at this time last year. Monthly costs for raw materials for businesses and goods coming out of factories rose significantly due to higher oil and gasoline prices,” Pfitzner added.
A sharp rise in energy prices in the wake of the Iran war has been blamed for reigniting inflationary pressures, and economists expect costs to accelerate further as the conflict continues.
“Pump and heating oil prices are likely to rise significantly towards the end of the quarter as the impact of the Iran conflict continues to reach the UK,” Sanjay Raja, chief UK economist at Deutsche Bank, said in an emailed comment ahead of the data release.
As a net energy importer, the UK is particularly vulnerable to global energy price shocks, such as those caused by the Middle East conflict.
Before the war began on February 28, the Bank of England was expected to cut interest rates as inflation cooled to its 2% target.
Economists say the central bank could raise interest rates, but whether policymakers will do so at their next meeting on April 30 is seen as a close call.
A Reuters poll last week found a majority of economists expect the BoE to keep interest rates on hold for the rest of the year, arguing that policymakers will choose to “wait out” if external factors cause a spike in inflation. BOE rate-setters will also be wary of fueling “stagflation” (low growth, high inflation, and rising unemployment) if they raise rates.
U.S. President Donald Trump extended a fragile ceasefire with Iran on Tuesday, drawing attention to developments in the Iran war. However, a second round of talks scheduled to be held in Pakistan this week has been postponed, and the outlook for further peace talks is uncertain.
ICAEW Chief Economist Suren Thiru said on Wednesday: “While extending the ceasefire cannot prevent a difficult period of higher inflation due to higher energy and food prices, headline interest rates are likely to rise above 4% by autumn despite slowing economic demand.”
“While these numbers will make uncomfortable reading for policymakers, the impending downward pressure on prices from the economic downturn should give rate setters plenty of discretion to keep rates on hold in anticipation of this period of heightened inflation.”
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