28th October 2026
Israel's inconclusive election has created a period of political uncertainty at a time when the Middle East remains a major source of concern for world energy markets. Benjamin Netanyahu may remain prime minister while politicians negotiate to form a new government. Meanwhile, the possibility of renewed military action against Iran is adding to fears that oil prices could climb even higher.
For Britain, and particularly for households and businesses already struggling with rising fuel and energy costs, the consequences could be felt well beyond the Middle East.
The question is whether the coming weeks bring progress towards peace or another escalation in a conflict that has already disrupted energy supplies and raised the cost of doing business.
An election without a clear winner
Israel's parliamentary election on 27 October has not produced an obvious route to a stable majority.
Exit polls put Netanyahu's Likud-led bloc and the opposition on broadly similar numbers, although the precise figures varied between broadcasters. Opposition leader Gadi Eisenkot has challenged Netanyahu's claim to continue leading the country, while Netanyahu has called for a right-wing national government.
The final allocation of seats and the ability of smaller parties to support one side or the other will determine what happens next. Neither winning the most votes nor emerging as the largest party automatically guarantees the premiership.
Israel's President Isaac Herzog will consult political parties before asking a candidate to form a government. The candidate initially has 28 days, with a possible 14-day extension, to assemble a coalition. If that attempt fails, further procedures may follow.
These negotiations can take weeks or months. Israel has experienced repeated inconclusive elections in recent years, demonstrating how difficult it can be to reconcile the demands of religious, nationalist, right-wing and centrist parties.
In the meantime, Netanyahu remains prime minister. An election does not immediately remove the outgoing government from office, and a caretaker administration continues to exercise governmental powers until a successor takes over.
That creates an important question: what might Netanyahu do with the authority he retains while the political negotiations continue?
Could Netanyahu use the interval to attack Iran?
Netanyahu has made clear that he wants to remove what he describes as the Iranian threat. In the run-up to the election, he spoke of a historic opportunity to act with US President Donald Trump against Iran.
Trump has also called for the two countries to finish the job they started. Those statements make the prospect of renewed military action a legitimate concern for anyone following developments in the region.
The American midterm elections on 3 November provide another important date. They will determine the political balance in Congress and offer an indication of how voters view the Trump administration, including its handling of the conflict and the resulting energy costs.
There is no evidence that the election timetable alone will trigger another attack. Nor can it be assumed that Netanyahu would order military action simply to improve his domestic political position. His stated security objectives, the advice of military and intelligence officials, the position of Washington and the risk of Iranian retaliation would all matter.
Nevertheless, the possibility cannot be dismissed.
A caretaker government is not automatically prohibited from authorising military action. Under Israeli law, decisions to go to war or undertake major operations likely to lead to war require government-level approval. The fact that an administration is awaiting replacement does not remove every power it possesses.
The distinction is important. Israel may need to respond to a genuine security emergency, but a major offensive would also carry significant political and economic consequences. An opposition leader has already warned against allowing political considerations to influence national security decisions.
Oil prices are already reflecting the danger
The oil market offers a clear illustration of how international events can affect everyday costs.
Brent crude has been trading around $114 to $116 a barrel, with prices moving sharply as traders respond to reports of possible military escalation, diplomatic contacts and threats to oil infrastructure.
On 28 October, Reuters reported that Brent rose to around $115.47 after an attack claimed by Yemen's Iran-aligned Houthi group on Saudi Arabia's major Ras Tanura refinery heightened supply concerns. Saudi authorities had not immediately confirmed the reported strike.
This is not simply a question of how much oil Iran produces. The wider Gulf region contains major production facilities, export terminals and shipping routes that are essential to world energy supplies.
The Strait of Hormuz is particularly important. If tankers cannot pass safely, or if shipping companies face much higher insurance premiums and delays, the cost and availability of oil can be affected even when production continues.
The market is therefore charging an additional premium for uncertainty. Traders are not just buying oil for immediate delivery; they are also assessing the possibility that supplies could become more difficult to obtain in the weeks ahead.
That helps explain why prices can rise rapidly on reports of attacks, then fall when diplomatic progress appears possible.
Why UBS expects $110 when oil is already higher
Swiss bank UBS has raised its forecast for Brent crude to around $110 a barrel towards the end of 2026, from an earlier estimate of $100.
At first sight, that seems puzzling when the market price is already approaching $116. But a forecast is not a ceiling. UBS is estimating where prices might settle, not promising that they will never rise above that level.
For its forecast to prove correct, prices would need to ease from current levels by year-end. That could happen if diplomatic efforts succeed, shipping becomes safer and the risk of further attacks diminishes.
However, UBS has also warned that renewed disruptions could push prices above $120. Its outlook depends on assumptions about the gradual recovery of oil flows and the eventual reduction of geopolitical risks.
Those assumptions may prove correct, but they could also be overtaken by events.
There are two broad possibilities. A credible agreement that reduces the danger to shipping could bring oil prices down, perhaps quite quickly. A new round of US-Israeli strikes, followed by Iranian retaliation against regional infrastructure or shipping, could push them higher.
Neither outcome is guaranteed. The difficulty is that markets can react before the consequences of a military decision are fully known.
What would higher oil prices mean for Britain?
The impact would extend well beyond motorists.
Higher crude prices can increase the cost of petrol, diesel, aviation fuel, road haulage and food distribution. Businesses facing more expensive transport and energy may pass some of those costs on to customers, while others may absorb them at the expense of their margins.
For households in rural Scotland, where many people depend on cars and some properties rely on heating oil rather than mains gas, the effects can be particularly direct.
A rise in diesel prices also affects farmers, construction firms, delivery businesses, bus operators and contractors. Even organisations working under existing contracts may seek to renegotiate terms if fuel costs rise substantially.
The result could be another squeeze on discretionary spending. Households worried about heating bills and fuel costs may reduce spending on meals out, holidays and other non-essential purchases. Businesses in hospitality and retail could then face higher operating costs at the same time as customers become more cautious.
There is also a wider economic risk. If energy prices push inflation higher, the Bank of England may have less freedom to reduce interest rates. Borrowers could face higher costs for longer, while businesses considering investment may postpone decisions because of uncertainty.
The effects would not be immediate or identical across every sector, but prolonged disruption would make economic planning more difficult.
Four possible outcomes
The coming weeks could develop in several ways.
First, diplomacy succeeds. Negotiations reduce the risk of renewed attacks, shipping conditions improve and oil prices gradually ease. This would provide some relief for consumers and businesses, although lower crude prices would not necessarily translate immediately into cheaper fuel.
Second, political negotiations drag on but military action is avoided. Netanyahu remains in office as caretaker prime minister while the parties attempt to form a coalition. Oil prices could remain elevated because the threat of escalation has not disappeared.
Third, Israel and the United States resume limited strikes. Iran retaliates, and markets respond with another increase in the risk premium. The size and duration of the price rise would depend on the scale of the fighting and whether oil infrastructure or shipping was affected.
Fourth, the conflict widens. If attacks disrupt major export facilities or seriously restrict traffic through the Strait of Hormuz, prices could move above $120 and potentially rise further. That would present a much more serious challenge for the global economy.
These are scenarios rather than predictions. Political uncertainty can produce sudden price movements in either direction.
The danger of several uncertainties arriving together
The concern is not that Netanyahu must attack Iran, or that UBS must be wrong. It is that several risks are converging at once: an inconclusive Israeli election, difficult coalition negotiations, an American election, renewed threats to regional energy infrastructure and an oil market already pricing in the possibility of further conflict.
Netanyahu may remain in office for weeks while the next government is negotiated. During that time, his administration retains substantial powers, although major military action is subject to government-level decision-making and would carry considerable risks.
Meanwhile, oil prices around $116 show how sensitive markets have become to developments in the region. UBS's $110 year-end forecast remains a possible outcome, but it depends on the situation becoming less dangerous rather than more dangerous.
For Britain, the distinction between a temporary oil-price spike and a prolonged supply disruption could be significant. A short-lived increase might be absorbed gradually. Sustained high prices would feed through transport, food, business costs and household budgets, potentially adding to inflationary pressure.
The next few weeks therefore matter for more than the future of Israel's government. They could also help determine whether energy prices begin to settle or whether another round of confrontation brings fresh economic pain.
For households and businesses already trying to plan around high costs, the uncomfortable reality is that some of the most important decisions affecting their finances may be made thousands of miles away, amid political negotiations and military calculations over which they have no control.