1st March 2026
Energy is a core input for almost everything the UK consumes. When oil and gas prices rise, the cost of producing, transporting, and storing goods rises with them.
This pattern was clear during the 2021-22 inflation surge, when energy costs were the single biggest driver of the UK's cost‑of‑living crisis.
Higher electricity, gas, and fuel prices fed directly into the Consumer Price Index, with energy categories contributing over 40% of total CPI inflation despite making up less than 7% of household spending.
The Office for Budget Responsibility notes that although the UK economy is less energy‑intensive than in the 1970s, it remains a net importer of energy, which makes it vulnerable to global oil shocks.
Past crises—such as the 1973 OPEC embargo and the 1979 Iranian revolution—triggered recessions and high inflation, and while today’s economy is more resilient, the same mechanisms still apply.
How rising oil prices feed into everyday costs
Several channels drive the inflationary effect:
Transport and logistics
Higher petrol and diesel prices make it more expensive to move food and goods across the UK.
Farming and fertiliser
Fertiliser production is extremely energy‑intensive, so spikes in oil and gas quickly raise agricultural costs.
Food processing and refrigeration — Energy‑heavy sectors feel the impact immediately and pass costs on to retailers.
Global supply chains
When shipping and freight costs rise, imported goods—from fruit to electronics—become more expensive.
During the Ukraine‑driven energy crisis, household energy prices rose by more than 130% and fuels and lubricants by nearly 40%, pushing the general price level sharply higher.
What this means for UK households now
If the Strait of Hormuz remains unsafe or closed, the UK would face:
Higher food prices within 1–3 months, especially for imported goods and energy‑intensive products.
Rising costs for household goods, packaging‑heavy items, and anything transported long distances.
Broader inflation, as businesses pass on higher energy and logistics costs.
Even though the UK economy is more energy‑efficient than in past decades, the OBR stresses that global oil shocks still raise inflation, reduce real wages, and slow economic growth.
What to watch next
The scale of price rises will depend on how long oil and LNG markets remain disrupted. If tanker traffic through Hormuz continues to stall, the inflationary pressure will build quickly and spread across the economy.