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Millions of families in the UK are bracing for a further rise in living costs as rising energy prices, driven by the US-Iran war, threaten to push inflation higher than expected.
Economists warn that the consumer price index (CPI), currently around 2.8% to 3%, may soon rise as wholesale gas and petrol prices continue to soar.
Deutsche Bank and Pantheon Macroeconomics predict that the CPI will remain at 3% for February, while Oxford Economics anticipates a slight decline to 2.8%, citing a decrease in petrol prices earlier in the month.
Sanjay Raja, the chief UK economist at Deutsche Bank, stated, “The UK’s disinflation story is set for another twist.
“The good news is that the CPI is expected to fall in the coming months. The bad news? Higher energy prices appear likely to significantly raise the CPI during the summer, creating yet another spike in the inflation trajectory.”
Analysts at Barclays project a CPI of 2.9%, noting a balance between lower fuel costs and rising prices for airfares and clothing.
The Bank of England has acknowledged these risks, warning that spikes in wholesale energy prices will delay the return of inflation to its 2% target. Forecasters now expect the CPI to reach around 3% in the second quarter of 2026, a significant rise from the previous estimate of 2.1%.
Edward Allenby, a senior economist at Oxford Economics, predicts an even sharper increase later in the year, with the CPI potentially exceeding 4% in the second half of 2026. He pointed to a 19% increase in the Ofgem energy price cap in July and higher petrol costs as key factors contributing to this rise.
Pantheon Macroeconomics has warned that continued spikes in gas prices could similarly drive consumer inflation close to 4% by the end of the year.
The Office for National Statistics will release the CPI figures for the 12 months ending in February on Wednesday, March 25, providing the first official insight into the war’s immediate impact on UK households.
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