Five ways the Iran peace deal could affect you and your money

Five Ways the Iran Peace Deal Could Impact Your Life and Finances

Global Oil Prices and Fuel Costs

Five ways the Iran peace deal - The US-Israel conflict with Iran erupted in February, sending ripples through the global economy. The Strait of Hormuz, a vital shipping route for oil and gas, saw its closure drive up costs for everything from energy bills to air travel. On 18 June, a peace agreement between Iran and the US was reached, signaling the reopening of the Strait. However, key discussions about Iran’s nuclear program will be postponed for 60 days, leaving uncertainty about the deal’s long-term stability.

Motor Fuel Prices in the UK

Since the war began, motor fuel costs have fluctuated. Petrol prices in the UK rose from 132.05p per litre to 154.72p, while diesel climbed from 141.6p to 174.30p. As of Thursday, the average cost of petrol and diesel has begun to ease, though they remain significantly higher than pre-conflict levels. Simon Williams, RAC’s policy head, noted that sustained declines in oil and wholesale petrol prices could eventually bring pump costs down, but the pace of this recovery is uncertain.

Gas Prices and Energy Bills

Gas prices in the UK nearly doubled at the start of the conflict, raising alarms about household energy costs. This gas is directly used in millions of homes for heating and hot water, and it also contributed to 27% of the country’s electricity last year. Pre-war, the benchmark gas price was below 80p per therm, but it reached 157p in early March. By now, it has dipped to 98p per therm. Cornwall Insight cautions that prices may not return to pre-war levels quickly, even with the Strait reopening.

Jet Fuel and Air Travel Costs

The Gulf supplies about half of Europe’s jet fuel. After the war began, jet fuel prices surged from $784 per tonne to $1,838, triggering fears of shortages and higher flight fares. Some airlines raised prices, especially for long-haul routes, but others lowered fares to attract passengers. Amaar Khan, a jet fuel expert at Argus Media, says while European airlines will have enough fuel for summer demand, prices are likely to stay above pre-war levels for much of the year.

Inflation Trends and Economic Outlook

Before the conflict, inflation had been declining in the UK and globally. However, the war disrupted this trend, primarily due to rising energy prices. In February, UK inflation fell to 3%, with the Bank of England predicting a return to its 2% target by April. By March, it jumped to 3.3%, stabilizing at 2.8% in April and May. The upcoming Ofgem energy price cap increase in July is expected to further push inflation upward. Meanwhile, US inflation rose from 2.4% to 4.2% in May, and the EU saw an increase from 2.1% to 3.3% over the same period.