A recent missile strike on an oil facility in the United Arab Emirates, attributed to Iranian forces, has sent shockwaves through global energy markets. Following military action by the US and Israel against Iran, including the assassination of Supreme Leader Ali Khamenei on 28 February, oil and gas prices have skyrocketed, intensifying the existing cost of living crisis in the UK.
Calls for Profit Caps Amid Energy Crisis
Richard Walker, a key adviser to the government on cost of living issues and chair of Iceland supermarkets, has urged ministers to consider implementing a temporary cap on profits for energy and petrol companies. His plea aims to protect consumers from excessive profiteering during the ongoing conflict in the Middle East, particularly following Iran’s blockade of the Strait of Hormuz, a critical artery for oil shipments.
“I have asked the government to consider a temporary profit cap… to stop producers and retailers exploiting the crisis to make windfall profits at the expense of consumers,” Walker stated in a column for the Sunday Times. He emphasised the distinction between reasonable profit and opportunistic profiteering, especially as families grapple with rising prices.
Government Faces Economic Pressure
As the situation escalates, Bank of England Governor Andrew Bailey is set to meet with Labour leader Keir Starmer and senior ministers in an emergency session aimed at addressing the mounting cost of living challenges stemming from the conflict. Concerns are growing within Downing Street and the Treasury that prolonged hostilities could hinder economic growth and necessitate government intervention to shield consumers from soaring energy bills.
The war’s impact is already being felt, with petrol and diesel prices climbing sharply, and mortgage borrowers facing increased repayments as interest rates are anticipated to rise in response to inflationary pressures. Official statistics are expected to confirm a steady inflation rate of 3% for February, a stark contrast to earlier predictions of a decline to the Bank’s target of 2%.
Economic Growth at Risk
The fallout from the US-Israeli actions against Iran continues to exacerbate the ongoing cost of living crisis that has plagued UK households since the onset of the Ukraine conflict. KPMG has revised its economic growth forecast, predicting a drop from 1.3% in 2025 to just 0.7% this year due to the energy shock. The consultancy warns that household energy bills could rise by up to 10% or more if the conflict persists.
Yael Selfin, KPMG’s chief economist, highlighted that the combination of subdued growth and rising costs is likely to lead many firms to scale back investment and consumers to limit discretionary spending. This could create a vicious cycle of economic contraction.
Union Response to the Crisis
In light of these challenges, the Trades Union Congress (TUC) has called for the establishment of an emergency taskforce to mitigate the economic repercussions of the ongoing US-Iranian conflict. TUC General Secretary Paul Nowak stressed the need for collaboration among unions, employers, and government to swiftly address job security and financial stability for families.
“The lessons from the pandemic are clear,” Nowak asserted. “When unions, employers, and government came together, we could protect jobs, keep businesses afloat, and provide security for families during uncertain times. We need that same approach now.”
The Energy Landscape Ahead
Chris O’Shea, chief executive of Centrica, indicated that rising energy prices might be unavoidable if the situation in the Middle East does not improve. He noted that while the impact of the conflict on gas prices may be less pronounced, petrol prices are likely to experience more severe fluctuations due to disrupted oil supplies.
“About 20% of the world’s oil supply has been affected by the closure of the Strait of Hormuz,” he explained. “The loss of gas is about 3-4% of global supply, which suggests electricity bills might not be hit as hard as petrol prices.”
Why it Matters
As the conflict in the Middle East unfolds, the repercussions on global energy markets are becoming increasingly severe, directly impacting the cost of living in the UK. With households already under financial strain, the call for government intervention to prevent excessive corporate profiteering has never been more urgent. The potential for long-term economic disruption looms large, highlighting the need for swift and effective measures to protect consumers from the fallout of international conflicts.
