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Thanks for following our coverage of the inflation figures for March, showing how the Iran war is impacting the British economy.
As ever, we will keep you up to speed with all the latest here.
Reeves’s inflation headache has only just begun
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The Iran war is driving up UK prices rapidly – but the impact of the biggest energy supply shock in history is only just beginning.
Soaring fuel prices drove Consumer Prices Index (CPI) inflation to 3.3pc in March, up from 3pc in February, according to new data from the Office for National Statistics (ONS).
The increase was largely driven by rising road fuel prices. By the end of March, drivers were paying an extra 20p per litre for petrol and 40p for diesel.
Rising prices are a headache for a Government that has promised to bring down the cost of living. But the worry for Rachel Reeves and her colleagues is that this is just the beginning of the crisis.
Britain in ‘early stages’ of inflation shock
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Britain is only in the early stages of an inflation shock from the Iran war, a think tank has warned.
Julian Jessop, economics fellow at the Institute of Economic Affairs, said the rise in inflation from 3pc to 3.3pc was “too high for comfort”.
He said: “This is just the early stages of the latest inflation shock. It will take several months for the jumps in the costs of fuel and other commodities to be passed through in full to the prices of other goods and services.
“It is also too soon to judge whether there will be any other second round effects, notably a sustained increase in inflation expectations.
“In the near term, inflation will probably fall back in April, reflecting the reduction in this month’s Ofgem cap on domestic energy bills and some favourable effects from other regulated prices.
“But pipeline pressures are building elsewhere and, unless the Government intervenes further, the Ofgem cap is going up again in July.”
He added: “In short, unless the Middle East crisis escalates further, UK inflation will probably be capped at around 4pc this year and then fall sharply next year.
“But this is still a major shock, with the economy set to flatline at best in the second quarter and possibly the third too.”
Pound rises as Trump extends ceasefire
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The pound rose as investors turned away from the safety of the US dollar after Donald Trump extended the US-Iran ceasefire.
Sterling was up 0.2pc to $1.352 but was little changed against the euro at €1.151.
Jim Reid, an analyst at Deutsche Bank, said Mr Trump’s ceasefire extension “has led to some recovery in markets”.
“But the breadth of the reversal this morning is relatively narrow, with more energy exposed regions underperforming,” he added.
The pound also rose as rising inflation also raised pressure on the Bank of England to keep interest rates on hold.
However, economists said the gains were held back as the data on inflation was not as bad as it could have been.
Core inflation, which strips out volatile food and energy prices, edged down from 3.2pc to 3.2pc.
Martin Beck, Chief Economist at WPI Strategy, said this “suggests underlying price pressures were more contained”.
Money markets showed a reduction in bets on rate rises this year, with an increase from 3.75pc to 4pc not expected by traders until as late as September.
Petrol prices falling slower than wholesale costs, says RAC
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RAC said petrol prices on forecourts have not fallen as fast as its analysts had expected after the recent tempering of oil prices.
Brent crude has traded between $90 and $100 over the last fortnight, down from a peak of nearly $120 last month.
However, petrol has only fallen by a penny a litre, with diesel down less than 2p in the last week.
RAC head of policy Simon Williams said: “While prices at the pumps have fallen for the last seven days, the drop isn’t as great or as quick as we’d expect, given our analysis of wholesale data.
He added: “We hope drivers will see the average price of petrol fall by at least 3p a litre and diesel by double that in the coming days.
“Drivers understand retailers have had no option but to put prices up due to the cost of oil being so much higher and they’re also suffering with fuel theft as widely reported this week, but as wholesale prices reduce so should forecourt prices.”
Oil tips above $100 despite ceasefire
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Oil prices briefly climbed above $100 a barrel after an Iranian gunboat attacked a container ship in the Strait of Hormuz just hours after Donald Trump extended the ceasefire with Tehran.
Brent crude oil was last up 0.9pc on the day above $99 after the Islamic Revolutionary Guard Corps (IRGC) boat opened fire on the freighter 15 nautical miles north-east of Oman.
The attack caused “heavy damage” to the vessel’s bridge, according to the Dubai-based United Kingdom Maritime Trade Operations (UKMTO).
There has been little reaction in markets to President Trump’s announcement of a ceasefire extension on Tuesday.
The Strait of Hormuz remains mostly closed and there was no sign of a resumption in US-Iran peace talks.
Thomas Mathews of Capital Economics said the earlier ceasefire was widely seen as indefinite so it was not surprising the latest announcement had not moved markets much.
“Obviously, any news on the re-opening of the Strait is a good candidate for the next big market flashpoint,” he added.
Government ‘must reduce everyday taxes and bills’
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Britain’s economy lacks the resilience needed to whether the shock from the Iran war after the “foolish policy decisions” of the Government, Telegraph readers said.
Here are some of the views on the latest inflation figures from the comments section below, and you can join the debate here.
Badenoch: UK paying price for Miliband’s net zero zealotry
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Inflation has been made worse by Labour’s focus on the switch to clean energy, according to Kemi Badenoch.
The Conservative leader criticised Energy Secretary Ed Miliband, who has failed to approve new drilling in the North Sea despite the energy crisis caused by the Iran war.
Ms Badenoch said: “Inflation is rising and we’re all paying the price for Ed Miliband’s net zero zealotry.
“It didn’t have to be like this.
“The Conservative’s Cheap Power Plan would cut bills by £200, by removing VAT, scrapping green taxes, and drilling the North Sea.”
Rents rise at slower pace in March
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The average cost of renting in the UK rose at a slower pace last month, easing the burden on households hit by surging fuel prices.
Typical private rents rose by 3.4pc to £1,377 in March, according to the ONS, down from 3.6pc in the year to February.
Average rents increased by 3.4pc to £1,434 in England, by 4.8pc to £830 in Wales, and by 2.1pc to £1,022 in Scotland.
Meanwhile, the average UK house price increased by 1.2pc in February, accelerating from 1pc in January, the ONS said.
Across the UK, the average house price in February was £268,000.
Average UK house prices increased by 1.2% (provisional estimate) to £268,000, in the 12 months to February 2026. This annual growth was up from 1.0% in the 12 months to January 2026. pic.twitter.com/06BJm7vR8c
— Office for National Statistics (ONS) (@ONS) April 22, 2026
Dettol maker warns of £150m blow from Iran war
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Household goods giant Reckitt Benckiser has warned over a possible hit of up to £150m if oil prices stay high due to the Iran war.
The Dettol and Durex maker said it faces higher costs if oil prices remain at $110 a barrel throughout 2026.
Shares fell 5.3pc as it warned higher prices would also hit consumer demand as household budgets come under pressure.
“While challenging to forecast, if commodity prices remain at significantly elevated levels throughout the year we would anticipate an impact on consumer demand as a result of pressure on household budgets,” it said.
Reckitt reported revenues rising by 0.6pc on a like-for-like basis in its first quarter, as higher prices offset a 2pc drop in sales by volume.
Inflation fears push up mortgage rates
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The surge in inflation caused by the Iran war has also pushed up the cost of getting a mortgage, industry data shows.
The average two-year fixed deal stands at 5.83pc today, a full percentage point higher than the 4.83pc at the start of March, according to Moneyfacts.
Lenders have pushed up rates over concerns that the spike in inflation will force the Bank of England to keep borrowing costs higher for longer.
The average five-year fixed deal has risen from 4.95pc at the start of March to 5.73pc today.
Justin Moy of adviser EHF Mortgages said: “Mortgage rates reacted well before these inflation figures, so no immediate changes are expected as a result of today’s announcement, and with oil prices dropping through the ceasefire, rates have levelled off or reduced a little already.
“The fear and concern of property buyers will continue to subdue the market and sellers also need to adjust their expectations for the next few months.”
Energy support package risks higher interest rates, warns bond trader
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The Chancellor may force the Bank of England to push up interest rates if she announces broad measures to support households through an Iran war inflation shock, the former adviser to George Osborne has said.
Rupert Harrison, now of bond trader Pimco, said Rachel Reeves has a “big choice” to make on the scale of any support for households grappling under the weight of higher fuel and energy prices.
He said markets had “taken comfort” from the Chancellor’s indications so far that any support would be targeted at those most in need, rather than the universal support announced in the wake of the Ukraine war.
“The risk here is that if the Government presses too hard on the accelerator by spending money and protecting people from price increases that the Bank of England needs to respond therefore by putting its foot on the brake, by either hiking rates more or keeping rates higher for longer and so there is a delicate balance here,” he told BBC Radio 4’s Today programme.
He said the barrier to the Bank raising interest rates “is quite high” because the Bank is not only worried about inflation, but also weakness in the economy.
“We had data yesterday on the labour market which showed it was quite weak,” he said.
“That is the difficult balancing act for the Bank. If this continues – and particularly if we get prolonged and ongoing disruption in the Strait of Hormuz or even escalation – the Bank will have to worry about not only a bigger inflation impact but also a growing negative impact on the economy. They may be more concerned about that.”
Bank of England ‘flying blind’ on inflation
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Policymakers at the Bank of England are “flying blind” over inflation as there remains no sign of an agreement to end the war between the US, Israel and Iran, an economist said.
James Smith of ING said the latest jump in inflation “tells us virtually nothing about the scale and duration of the inflation wave to come”.
The consumer prices index rose from 3pc to 3.3pc in March as the Iran war choked off supplies of oil and gas, pushing up the price of petrol at the pumps.
Mr Smith said he expects inflation to peak “fractionally above 4pc in August/September” as a result of a 25pc rise in household gas and electricity bills.
However, he does not expect the Bank of England to raise interest rates this year from their current level of 3.75pc.
“Against a fragile jobs market, we don’t expect a rate hike next week, nor this year,” he said.
“So long as inflation doesn’t spike materially above 4pc – a level above which the Bank has identified as being more likely to trigger a persistent bout of price pressure – we think the Bank of England will prefer to keep rates on hold this year.”
Reeves urged to remove ‘inflationary pressures’ from economy
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Rachel Reeves must remove “inflationary pressures” in the economy to help businesses grappling with effects of rising prices, bosses warned.
Kate Nicholls, chairman of UKHospitality, said the sector was already suffering under the weight of recent rises in National Insurance, the minimum wage and business rates.
“We are unable to pass that on to our consumers,” she told BBC Radio 4’s Today programme.
“If prices go up, you will see fewer people coming out to eat and drink and stay overnight. That impacts our ability to remain viable as businesses.
“Put simply the money coming through the front door is not enough to cover the costs of doing business.
“There is an urgent need to remove any inflationary pressures in the system given that we know the second order effects of inflation arising from the war in the Middle East will take longer to unwind and will hit our sector first, hit us hardest, and we will be last to come out of it.”
UK stocks rise after US-Iran ceasefire
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The FTSE 100 shrugged off the rise in inflation after Donald Trump announced an extension of the ceasefire in the US-Iran war.
The UK’s flagship stock index was up 0.1pc to 10,513.04 while the mid-cap FTSE 250 climbed 0.3pc to 23,004.66.
Inflation risks hitting 4pc by November
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Inflation will rise to around 4pc by November, economists have warned, as the Iran war pushes up energy bills.
Capital Economics forecast that surging oil and gas prices will push up the Ofgem price cap will jump by 15pc in July and by another 3.5pc in October, pushing up costs for households.
Overall, this will add around 0.7 percentage points to inflation, which reached 3.3pc in March.
Official figures showed motor fuel prices rose at their fastest pace in three years last month, while heating oil inflation surged by 95.3pc, its highest since September 2022.
Deputy chief UK economist Ruth Gregory said the next eight months “will be an uncomfortable ride” for the Bank of England as it decides whether to raise interest rates.
She added: “That said, with economic growth weak and the labour market still fragile, we think second-round effects will be limited and interest rates will remain unchanged at 3.75pc this year.”
Airfares jump by 10pc
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Airfares rose by 10pc between February and March in their largest jump over that period in a decade.
The ONS said the jump was almost entirely from long haul routes, where the return flights were on the Tuesday immediately after the Easter weekend.
Traders reduce bets on higher interest rates
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Money markets indicate the Bank of England will raise interest rates at a slower pace following the latest inflation figures.
Traders are no longer betting that policymakers will raise rates by July, pushing back expectations to September.
Inflation rose by 3.3pc last month but this was in line with analyst expectations.
Adam Deasy, economist at PwC UK, said the big question for the Bank of England is “how contagious inflation will be”.
He said: “This is just the first wave of the energy shock, primarily showing up in higher prices at the pump. These are prices that are quicker to respond, with the average price of diesel at its highest level since November 2023.
“We are yet to see the knock-on impact of price pressures in downstream or byproducts to oil and gas, such as fertiliser, helium, plastics or metals.”
He added: “The pre-existing weakness in the economy suggests runaway inflation or wage growth is unlikely. But uncertainty over the path of the conflict brings uncertainty over prices, leaving the Bank to wait-and-see. What’s clear for now is that the only way is up.”
Labour have made inflation worse, says Stride
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Sir Mel Stride, the shadow chancellor, said Labour had “made everything worse” in the wake of rising inflation.
Sir Mel said: “The conflict in the Middle East is increasing inflation – but Labour’s choices have made everything worse and made our economy vulnerable.
“Tax hikes, reckless spending and disastrous energy policies have left Britain exposed. We already had the highest inflation in the G7 when this crisis began.
“We need a different approach – cutting the benefits bill, lowering taxes and drilling in the North Sea. Get Britain working again.”
Fuel prices rise at fastest pace in three years
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Motor fuels were the largest driver of inflation last month, the ONS said, but the figures suggest a much bigger jump in the pace of price rises is on the way.
The average price of petrol rose by 8.6p per litre in the period covered by the ONS, while diesel rose by 17.6p.
However, drivers on Tuesday were paying 24.7p per litre more for petrol and 47.8p more for diesel compared to the start of the Iran war, according to RAC.
The ONS said the average price of petrol stood at 140.2 pence per litre in March, the highest price since August 2024.
Overall, fuel prices were up by 4.9pc in the 12 months to March, which was the largest jump since January 2023.
Reeves says Iran war ‘pushing up bills for families’
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Rachel Reeves said the Iran war was raising costs for households and insisted her plan was the right way to address soaring prices.
The Chancellor said: “This is not our war, but it is pushing up bills for families and businesses. That’s why it’s my number one priority to keep costs down.
“Our economic plan is the right one and has put us in a stronger position to support families in the face of this new crisis.
“We’ve taken £117 off energy bills, frozen rail fares and protected motorists with the fuel duty freeze.
“We’re acting to protect people from unfair price rises if they occur to bring down food prices at the till, and are boosting long-term energy security — building a stronger, more secure economy.”
Higher fuel prices push up inflation
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ONS chief economist Grant Fitzner said: “Inflation climbed in March, largely due to increased fuel prices, which saw their largest increase for over three years.
“Airfares were another upward driver this month, alongside rising fuel prices.
“The only significant offset came from clothing costs, where prices rose by less than this time last year.
“The monthly cost of both raw materials for businesses and goods leaving factories rose substantially, driven by higher crude oil and petrol prices.”
Good morning
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Thanks for joining me. Inflation rose by 3.3pc in March after the Iran war pushed up fuel prices, official figures show. Here is what you need to know.
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What happened overnight
Asian shares were mixed in cautious trading after President Donald Trump extended the US-Iran ceasefire.
Japan’s benchmark Nikkei 225 rose 0.3pc to 59,530.64. Australia’s S&P/ASX 200 declined 1.2pc to 8,841.00. South Korea’s Kospi added 0.4pc to 6,413.62.
Hong Kong’s Hang Seng lost 1.3pc to 26,140.05, while the Shanghai Composite gained 0.3pc to 4,096.59.
On Wall Street, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all fell 0.6pc after US Vice President JD Vance called off a trip to Pakistan, where he was expected to lead American negotiators in talks with Iran to extend the ceasefire. It closed at 7,064.01.
Less than 10 minutes after the US stock market finished trading for the day, Mr Trump said he would extend the ceasefire to give Iran time to submit a proposal to end the war.
Oil prices have been wavering. In Asian trading Wednesday, benchmark US crude fell 19 cents to $89.48 a barrel. Brent crude, the international standard, lost 12 cents to $98.36.
The moves were milder than the vicious swings that rocked Wall Street earlier in the war, when the price for a barrel of Brent crude briefly topped $119 and the S&P 500 dropped nearly 10pc below its prior all-time high.
The US stock market remains near its most recent record, which was set Friday, indicating investors remain optimistic that the United States and Iran will avoid a worst-case scenario for the economy.