- Consumer prices rose by 3.3% year on year in March, from 3% in February. The Office for National Statistics said this was the first significant impact of the Iran war on inflation.
- Petrol prices meanwhile rose by 8.6 pence per litre and diesel by 17.6 pence, pushing inflation higher.
- The Bank of England is weighing whether higher energy costs will reignite inflation expectations, with the surge strengthening arguments for energy market reforms.
The UK’s cost of living spiked again in March as energy prices fed into broader inflation, official data shows.
The Consumer Price Index rose by 3.3% year on year, up from 3% in February and well above the Bank of England’s 2% target. The Office for National Statistics attributed the rise largely to a surge in fuel costs – the biggest monthly jump in motor fuel prices since 2022 – with petrol climbing 8.6 pence per litre and diesel 17.6 pence.
The inflation data highlight the rapid pass‑through of geopolitically driven energy shocks. The Iran war has restricted oil and LNG shipments through the Strait of Hormuz and driven global prices higher. In Britain, where pump prices are influenced by international crude markets and domestic taxes, motorists felt the impact almost immediately.
Air fares and food prices also rose, adding to the squeeze on household budgets. Official figures show that factory input costs – what producers pay for raw materials and energy – jumped much more than expected, signalling that price pressures may spread further through the economy.
Economists are divided over the implications for monetary policy. Some argue that the Bank of England should look through temporary energy spikes and avoid further rate hikes given weak wage growth and slowing consumer demand. Others warn that persistent high energy costs could revive inflation expectations and make it harder to return to target.
The Bank’s Monetary Policy Committee meets next week and will weigh whether the energy‑driven uptick warrants a response. The government, meanwhile, is under pressure to support households through targeted rebates or tax cuts, but fiscal space is limited.
The broader takeaway is that energy remains a principal driver of UK inflation and economic performance. Even as overall demand remains subdued, supply shocks can quickly feed into prices because Britain imports most of its oil and gas.
This reinforces the case for policy reform: decoupling electricity prices from gas, accelerating renewables and bolstering energy efficiency. High fuel costs also increase the appeal of electric vehicles and public transport. For policymakers, balancing inflation control with growth and the transition to clean energy will require careful coordination of monetary, fiscal and regulatory tools.
