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As tensions involving Iran continue, the knock‑on effects are increasingly being felt in everyday UK finances – with the latest inflation figures starting to show the impact.
From higher petrol prices and volatile pension values to shifting mortgage rates, this latest bout of uncertainty raises practical questions for households trying to plan ahead. The good news is that while you can’t control geopolitics, there are still sensible steps you can take to steady your finances and protect your longer‑term plans.
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Consumer prices index inflation rose to 3.3% in March, up from 3% in February. This was largely because of rising petrol prices - the most visible financial impact so far of the Middle East conflict.
Charlotte Kennedy, chartered financial planner at Rathbones, says: “The latest inflation reading may mark the start of what is hoped to be a short-lived spike, largely driven by the conflict in the Middle East, which has triggered the sharpest rise in fuel prices in over three years. It serves as a stark reminder of how quickly geopolitical tensions can feed into household finances.”
When it comes to fuel bills, while the Ofgem energy price cap (currently set at £1,641 a year for April to June for a typical dual-fuel household in Great Britain) offers some short-term protection. But bills are likely to rise later in the year. Businesses, which are not protected by the price cap, are already seeing increased bills in many cases.
The March inflation figures only include some of the petrol price rises, which continued for the first half of April. According to the RAC, average petrol and diesel prices then started falling on 16 April after 46 days of increases – the longest run of consecutive rises on record. So far they have only fallen by less than 1p a litre, and are still above 157p a litre for petrol and 189p a litre for diesel.
It’s still too early to see the conflict’s effect on food prices, but it’s likely to be noticeable when it comes.
Kennedy says: “Energy costs rarely stay contained – they tend to work their way into the broader economy, particularly in areas such as food and air fares, where higher input costs push prices higher.”
Sarah Coles, head of personal finance at AJ Bell, highlights the potential impact on food costs. “Food prices will be one to watch in the months to come, with food and non-alcoholic drink prices up 3.7% in a year – from 3.3% a month earlier. These were powered by longer-term issues, increasing the price of chocolate, meat, fish and soft drinks, but if oil prices remain higher, we can expect it to start to affect the rest of the basket too.”
Kennedy adds: “The pressure is building beneath the surface, but the full impact on food and drink prices may not yet be fully realised. The conflict in the Middle East has already delivered a cost shock that manufacturers are unlikely to absorb indefinitely. As these costs work their way through the system, Britons are likely to feel the effects more noticeably in the months ahead.
“For retailers that have locked in costs such as energy in advance, the lag before prices adjust could be longer.”
The UK mortgage market has changed since the start of the year as a direct result of the conflict in the Middle East. With inflation risks persisting, base rate expectations have shifted, and fixed mortgage rates have risen significantly over the past month.
Recent data shows that for first-time buyers, home movers and remortgagers, the most competitive fixed rates have increased by roughly a percentage point since the start of 2026. The number of fixed-rate deals has dropped by around 10% since mid-January, and the number of tracker deals is up.
Tracker mortgages are currently offering some of the cheapest deals on the market. In fact, 88 out of the 100 best rates are offered on tracker products, according to Which?.
Borrowers must weigh up their appetite for risk. If the Bank of England base rate (currently at 3.75%) stays stable or reduces, this would make trackers appealing. But there is a significant risk that continued conflict in the Middle East could push inflation up, which might force the base rate higher and increase your monthly repayments. On the plus side, tracker mortgages usually do not include early repayment charges, meaning they offer excellent flexibility if you plan to move home soon or if you plan to overpay by more than a significant amount.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, says that a more pessimistic-looking job market could prevent further base rate rises: “UK labour market data is starting to show early signs that higher energy costs linked to the Iran war are feeding through into business hiring plans, with payroll employment falling by 11,000 in March and job vacancies slipping from 721,000 to 711,000. Pay growth is also beginning to ease... A loosening labour market reduces the likelihood of further interest rate hikes, which helps to firm up our view that the Bank of England will keep things on pause until the conflict plays out."
If you have a defined contribution pension – the most common type of private and workplace pension – it will be invested in the stock market. You may have noticed more volatility than usual recently.
Britzman says: “The recent yo-yoing in equity sentiment continues to be driven less by fundamentals and more by swings in oil prices, as investors try to second-guess how Middle East negotiations are progressing.”
For pension savers, the advice remains steady. Tom Selby, director of public policy at AJ Bell, reassures savers not to panic: “Given the scale of the instability we are seeing in the Middle East – and specifically the knock-on impact on oil supplies and global confidence – it is inevitable there will be a short-term impact (at the very least) on people who are invested in global markets, which includes anyone with a defined contribution pension.”
He adds: “At times like this it is crucial to remain focused on your long-term goals. A short-term hit to your investment value shouldn’t be a cause for alarm.”
Most pension plans come with a default “lifestyle” option which sees your investments moved into lower-risk assets as you get closer to, or are in, retirement.
For those with a defined benefit or final salary pension, the conflict will have no direct impact on your guaranteed income. Similarly, the state pension remains protected by the triple lock, which delivered a 4.8% rise this April, ensuring that part of your income keeps pace with recent price hikes.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: “This means someone on a full new state pension will now get £575 more per year in their pockets, so there is some respite.”
If you’re wondering what to do with your pension pot, Morrissey points out that “Annuity incomes have also been drifting higher.” These can offer some certainty about your future income, compared to leaving your pension pot invested. But Morrissey warns: “Of course, level annuity incomes don’t change, and as time goes on, you might find that the income no longer meets your needs – you could be retired for decades, and inflation will nibble away at your purchasing power over time.
“You can get inflation-linked annuities that rise every year, but the starting income tends to be much lower. It’s a decision that needs careful consideration as, once bought, an annuity cannot be unwound.”
Read more: How much income will an annuity give you in retirement?
The 2026/27 tax year is now under way. This means your annual allowances have reset, giving you a fresh £20,000 ISA allowance and up to £60,000 in pension contribution annual allowance.
Despite market volatility, the start of the tax year is arguably the best time to invest, giving your money the maximum possible time to grow shielded from tax. If you are nervous about current market swings, gradually drip-feeding funds (in other words, investing bit-by-bit over time rather than all at once) is one approach that can help reduce the impact of volatility. Always be aware that the value of your investment can go down as well as up.
If you’re worried about rising costs, there are other things you can do to protect yourself. Kennedy says: “Against this backdrop, maintaining financial resilience is crucial. Keeping a close eye on your budget and making timely adjustments to discretionary spending can help soften the blow. Building a degree of flexibility – whether by cutting back on non-essentials or bolstering savings – can provide a valuable buffer against further price shocks.”
Sarah Pennells, consumer finance specialist at Royal London, says: “If you’ve not reviewed your spending and budget recently and have been loyal to the same supermarket, broadband and mobile provider, you may be able to make savings.
“There are three ways to improve your finances when costs are rising: to spend less, to increase your income, and to get better value from the money you do spend. So, start by tracking what you spend, which banking apps make much easier to do, and see if there are areas where savings can be made.
“Keep an eye out for any better deals on offer for energy, broadband and your mobile phone; you should consider switching providers if it makes financial sense. Also, see if there’s any money you’re entitled to that you’ve missed out on – as billions of pounds in state benefits go unclaimed every year and there’s vast amounts in lost savings accounts, old pensions and unclaimed Premium Bond prizes as well.”
When global events feel uncertain, focusing on what you can control is the best remedy. Here is an actionable checklist to help you shore up your finances:
History shows us that markets eventually recover from geopolitical shocks. A calm, long-term approach remains the best way to protect your personal finances.
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