UK Inflation Climbs to 3.3 Percent as Fuel, Food Costs Rise Amid Iran War

UK inflation rose to 3.3 percent in March from 3 percent in February, driven largely by higher fuel and travel costs, according to April 22 data from the Office for National Statistics (ONS), which showed the first effects on prices from the Iran war.

Gasoline prices rose by 8.6 pence (11.4 cents) per liter between February and March, reaching an average of 140.2 pence per liter ($7 per gallon), the highest since August 2024.

Diesel prices also jumped sharply, increasing by 17.6 pence (22 cents) per liter to 158.7 pence per liter ($8.02 per gallon).

Transport costs overall rose by 4.7 percent in the year to March, the highest annual increase since December 2022. Airfares surged by 10 percent over the month, most of which was accounted for by long-haul flights.

Clothing and footwear prices fell by 0.8 percent over the year, the lowest rate since March 2021, when COVID-19 pandemic-related disruptions affected pricing.

ONS Chief Economist Grant Fitzner said in an April 22 post on X that “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,” he said.

‘Not Our War’

UK Chancellor Rachel Reeves pointed to global instability as a key driver of rising prices.

“This is not our war, but it is now pushing up bills for families and businesses,” Reeves said in an April 22 post on X. “That’s why keeping costs down is my number one priority – and our economic plan has put us in a stronger position to face this crisis.”

Economists have said the latest figures may represent only the initial effects of global tensions on consumer prices.

Resolution Foundation Chief Economist James Smith said on April 22 that further increases in food and energy bills are still to come.

He said that although gasoline prices adjust rapidly, food inflation can take up to a year to fully pass through to consumers, and energy costs are likely to rise more sharply later in the year.

“The outlook remains highly uncertain,” Smith said in a post on X.

He said that targeted support for vulnerable households may be necessary.

Before the U.S.–Israeli war on Iran began on Feb. 28, the Bank of England said UK inflation, the highest among the Group of Seven economies for much of the past four years, was likely to be close to its 2 percent target in April.

But last month, it sharply increased its inflation forecast because of the energy price shock, predicting it would ​rise toward about 3.5 percent by the middle of ⁠2026. The International Monetary Fund said last week that UK inflation would peak at 4 percent.

Danni Hewson, head of financial analysis at AJ Bell, told The Epoch Times that the inflation increase is unlikely to make any change to the MPC and that markets fully expect a hold.

“For the Bank of England, the specter of stagflation will stalk MPC members as they sit around the table next week and try to keep their balance,” she said.

“If they don’t hike rates and inflation becomes embedded, they will be accused of not acting soon enough, but if the UK does more than flirt with recession in the second half of the year, they will face criticism for not doing enough to stimulate an economy struggling to remain steady.”

Reuters contributed to this report.