Rising oil prices threaten to derail Britain’s battle against inflation as figures show it is proving harder to defeat than expected.
Brent crude rose as high as $93 a barrel after a deadly explosion at a Gaza City hospital fueled further tensions in the Middle East.
If they continue, higher oil prices could impact the cost of gasoline and diesel.
Figures published yesterday by the Office for National Statistics (ONS) showed that rising fuel prices are an obstacle in the fight against inflation, which remained at 6.7 per cent in September.
Economists expected the consumer price index, a measure of inflation, to fall to 6.6 percent.
Filling up with fuel: Figures published by the Office for National Statistics show that rising fuel prices at the pump are already proving to be a hurdle in the fight against inflation.
There was some joy for supermarket shoppers when food prices fell 0.2 percent, the first drop since September 2021.
But this was offset by rising refueling costs, with petrol rising by 5.1p liters in August and diesel by 6.3p.
Victoria Scholar, of Interactive Investor, said: ‘Rising oil prices have pushed up motor fuel prices, to some extent offsetting the impact of the Bank of England’s aggressive stream of rate rises on the overall rate of inflation. .
“Further increases in oil prices could derail inflation’s path toward more normal levels and could pave the way for further monetary tightening by the central bank.”
Experts still believe UK inflation is on the decline and a big drop is expected when October figures are published next month, due to lower gas and electricity bills. Ofgem’s energy price cap was reduced at the beginning of October.
However, central banks and government officials are monitoring volatility in energy markets caused by Hamas atrocities in Israel, which have driven up European gas and oil prices.
For markets, the fear is that the conflict will spread throughout the Middle East, disrupting oil supplies. At the center of this is Iran, a regional power and Hamas supporter, which is the target of US sanctions.
Iran’s Foreign Minister Hossein Amir-Abdollahian yesterday urged Middle East governments to impose an oil embargo on Israel, although OPEC+ cartel sources have said he did not plan to take any such immediate action.
Analysts are closely monitoring how Israel’s military response develops. Vivek Dhar of Australia’s Commonwealth Bank said: “A prolonged occupation is emerging as the scenario that pushes Brent oil futures above $100 because it increases the risk that the conflict between Israel and Hamas will expand and potentially draw directly to Iran.”
Other factors are also driving up oil prices: U.S. crude stocks are running out faster than expected and China is reporting stronger-than-expected third-quarter growth.
But it is the conflict between Israel and Hamas that looms large for now, overshadowing last week’s meetings of the International Monetary Fund (IMF) and World Bank in Marrakech, Morocco.
IMF chief economist Pierre-Olivier Gourinchas said a 10 percent rise in oil prices could shave 0.15 percent off GDP growth next year and add 0.4 percentage points to global inflation. .
