Drivers in the UK could face record-breaking petrol prices as soon as this month as the conflict between US and Iran disrupts oil markets across the globe.
Conflict has spread across the Middle East after the US and Israel carried out strikes on Iran on Saturday, which were followed by retaliatory Iranian strikes on targets in the United Arab Emirates (UAE), Qatar, Bahrain, Jordan and Iraq.
Blasts continue to be reported across the region, as America and Israel maintain airstrikes on Iranian targets. The country’s supreme leader Ali Khamenei was killed in a targeted attack on Saturday, and top officials have vowed not to negotiate with the United States.
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In response to the conflict and Iranian warnings, several oil companies have now suspended shipments of crude oil through the Strait of Hormuz.
At least three ships were reported to have been attacked near the strait over the weekend, sending operations into turmoil.
The strait provides the only passage from the Persian Gulf to the open ocean, making it a crucial point for the operation of the oil industry. Around 20 per cent of the world’s gas and oil is shipped through the waterway.
Iran has warned vessels not to pass through the strait, with international shipping coming to an effective standstill at the entrance to the passage.
It is located in the strip of sea between Iran, to the North, and Oman and UAE to the South. Iran has hit American-linked targets in UAE cities of Dubai and Abu Dhabi in recent days, meaning missiles are liable to continue flying over the strait.
What does this mean for UK oil prices?
Brent crude, the global benchmark for oil prices, jumped to $82 a barrel on Monday – a rise of over 10 per cent. The rate had already been at a seven-month high before Saturday’s attack, reaching $73 a barrel. It has now fallen back to $79 a barrel.
This is likely to continue to rise, experts warn, with a prolonged conflict having potential to create record-breaking price hikes in the UK.
Edmund King, president of the AA, has warned that the significant disruption to the oil trade could bring this situation about within the month.
“The turmoil and bombing across the Middle East will surely be a catalyst to disrupt oil distribution globally, which will inevitably lead to price hikes,” Mr King told The Times.
“So drivers beware, within the next 10 to 12 days we could be seeing record prices at the pumps.”
Adding further difficultly for drivers is the planned increase in fuel duty after it was cut by 5p-a-litre in March 2022 in response to Russia’s invasion of Ukraine.
Chancellor Rachel Reeves announced a reversal to this policy at November’s Budget, beginning with a 1p increase in September this year, followed by 2p in December and the final 2p in March 2027.
According to the AA, petrol prices are average 132.9p at present. The motoring giant adds that, after the 5p cut is reserved, volatility in the market could increase this to 142.5p – equal to the highest level registered before the pandemic.
