10th September 2026
For the past week or so, $100 a barrel has been the number everyone in the oil market has been watching.
Now it has happened.
Brent crude has pushed above $100 a barrel and, rather than immediately falling back, has remained there. On Thursday it was trading around $101 a barrel, with the market increasingly worried that disruption to oil supplies through the Middle East could last for some time. Brent has risen by almost 30 per cent since early August.
So is $105 the next target? Quite possibly.
But the bigger question for Britain is not whether oil reaches $105. It is what happens after it does.
Because the price on the oil market changes almost instantly. The effect on household budgets and the wider economy takes much longer.
$100 is psychological — but the shortage is real
Round numbers matter in financial markets. Once oil breaks through $100, traders naturally start looking at $105, $110 and perhaps $120. But this is not simply a psychological exercise.
There is a genuine supply problem behind the price. The Strait of Hormuz, through which roughly a fifth of global oil and gas supplies passed before the current conflict, is experiencing severely reduced flows. Attacks on shipping and energy infrastructure are adding further uncertainty. Global oil stocks are falling, while the US Energy Information Administration has raised its price forecasts.
That means $105 is perfectly plausible. It does not mean it is inevitable.
Oil prices can fall remarkably quickly if the geopolitical situation suddenly improves. But if disruption continues, the market will increasingly ask a much more important question:
Where are the missing barrels going to come from?
That is when $105 could become $110, and $110 could become $120. Britain does not feel $100 oil immediately
This is where the story becomes more interesting for ordinary people. Suppose oil rises from $80 to $100. The oil price has gone up by 25 per cent, but your shopping bill does not immediately rise by 25 per cent.
Your petrol price does not necessarily rise overnight. Your builder does not immediately increase his hourly rate. The supermarket does not instantly change every price on its shelves.
Businesses initially absorb some of the increase.
Then the bills start arriving.
A haulage company pays more for diesel. An airline pays more for fuel. A manufacturer pays more to transport raw materials and finished products. Farmers face higher fuel, fertiliser and machinery costs.
Eventually those costs work their way through to the consumer.
That is why an oil shock can be more dangerous several months after it begins than on the day the oil price hits its peak. The Bank of England has already warned that higher energy prices can take time to feed through into food and manufactured goods.
The important point is that Britain could therefore still be experiencing the economic consequences of today's $100 oil even if the oil price has fallen back by then.
Petrol is only the beginning
Most people notice an oil-price increase first at the petrol station. But petrol is probably the least interesting part of the story.
Oil is embedded throughout the economy. It affects diesel, aviation fuel, transport, plastics, chemicals, manufacturing and the cost of moving goods around the country.
And diesel can be particularly troublesome.
The Bank of England has previously pointed out that disruption to Middle Eastern refining has pushed diesel prices up by more than petrol prices. That matters because diesel is heavily used by commercial vehicles.
The lorry delivering food to your local supermarket uses diesel. The van delivering your online order uses diesel. The machinery working on a building site uses diesel.
So the oil price can eventually become a cost attached to thousands of things that appear to have nothing to do with oil.
Then comes inflation
This is where the oil story becomes a Bank of England story. The Bank's July forecast already expected UK inflation to rise to around 3.2 per cent in the final quarter of 2026, with higher energy prices contributing directly and indirectly to the increase.
And that forecast was made before the latest move above $100. The danger is not simply that energy becomes more expensive. It is that businesses begin passing those costs on to customers.
Workers then find that their household costs have risen and seek higher wages.
Companies face higher wage bills and prices rise again.
That is the dreaded second-round effect. The Bank has warned that the longer an energy shock lasts, the greater the risk that it becomes embedded in wages and prices. Its own research suggests oil shocks have a larger and more persistent effect on UK inflation when inflation is already relatively high.
And then there are interest rates
This could be the part that catches households by surprise. People often assume that an oil-price shock automatically means higher interest rates.
It doesn't.
The Bank cannot produce more oil or reopen the Strait of Hormuz by changing Bank Rate. But it can respond if an energy shock starts pushing inflation persistently higher.
That creates a difficult choice.
If the economy is slowing because households and businesses are being squeezed by expensive energy, higher interest rates could make the slowdown worse. But if inflation remains too high, cutting rates could allow inflationary pressures to become embedded. The result could be a central bank caught between inflation and economic growth.
That is an uncomfortable position and it is already showing up in financial markets. Global bond yields have risen as investors reassess the outlook for inflation and interest rates following the latest oil shock.
The household squeeze comes in stages
For families, the damage therefore arrives in layers. First comes the more expensive petrol and diesel and then higher heating and energy costs.
Then higher prices for food and other goods as businesses pass on increased transport, energy and production costs.
Then perhaps higher borrowing costs if inflation prevents interest rates from falling as quickly as expected.
And finally there is the less obvious effect.
When households have to spend more on essentials, they have less money available for everything else. The family that spends another £20 or £30 a month on fuel and heating may decide to eat out less often. The household facing a larger mortgage payment may postpone buying a new car.
The business facing higher transport and energy costs may postpone employing another worker.
Multiply those decisions across millions of households and thousands of businesses and the oil shock becomes an economic growth problem.
$105 would matter psychologically too
If Brent moves decisively through $105, it would send another signal to markets. It would suggest that $100 was not the ceiling. That could encourage traders to look towards $110.
If the physical supply situation continued deteriorating, $120 would no longer look like an extraordinary number.
Indeed, the Bank of England has already modelled a much more severe scenario in which oil reaches around $130 a barrel if Middle Eastern energy supplies remain substantially disrupted. That was a scenario rather than a forecast, but it illustrates how seriously the potential supply shock is being taken.
Britain has a problem that is bigger than petrol
The temptation is to watch the oil price every morning and ask whether it has gone up or down.
But that can be misleading. The real economic story is happening behind the headline number.
Oil at $100 today could mean higher transport costs next month, higher food prices after that and a more difficult interest-rate decision later.
And if oil moves to $105 or $110, the process starts again from a higher base. That is why the next few weeks could be more important than the last few days.
If the Middle East crisis eases, oil could fall quickly and some of the fear will disappear.
But if supplies remain disrupted, Britain could be facing an awkward combination of higher prices, weaker household spending and interest rates that cannot fall as quickly as people had hoped.
The $100 barrier has now been broken. The next number may be $105. But for Britain, the more important number is the one that appears months from now on the supermarket receipt, the fuel pump, the energy bill or the mortgage statement.
The oil price moves first. The bill arrives later.