The world is in the grip of a fresh oil crisis. War in Iran has sent crude prices surging to around $100 a barrel, triggering economic shockwaves that extend far beyond the forecourt. The conflict, which has closed the Strait of Hormuz — a chokepoint through which 20-30% of global oil and 20% of liquefied natural gas (LNG) passes — has caused what the International Energy Agency (IEA) describes as the largest supply disruption in the history of the global oil market. By mid-March 2026, production from Gulf countries had dropped by at least 10 million barrels per day, and the IEA estimates a cumulative shortfall of roughly one billion barrels in global oil deliveries from the Gulf region as of 13 May.
The price of Brent crude, the international benchmark, was trading at around $91-$95 per barrel on 1 June 2026, having dipped briefly to $91 on news of a potential deal. Before the conflict, in early January 2026, oil was priced at roughly $60 per barrel. Futures markets now indicate that crude may not return to that level until the 2030s. Some analysts predict Brent will average around $60 per barrel for the full year, but they acknowledge that geopolitical risks remain a wild card.
Economic Fallout for the UK
For Britain, the timing could hardly be worse. The UK is a net energy importer, making it especially vulnerable to supply shocks. Economists warn that the oil price surge is likely to push the economy into recession, with some forecasts cutting GDP growth for 2026 to as low as 0.4%. The inflationary pressure from higher energy costs is already feeding through: petrol, diesel and household gas bills are all rising sharply. According to market data, a tank of petrol for a typical 55-litre car now costs around £14.60 more than at the start of the conflict. UK heating oil prices are predicted to remain between 60 and 90 pence per litre, with geopolitical tensions and the pace of the green energy transition as key risk factors.
The manufacturing sector is also feeling the squeeze. Input prices for energy, fuels and other commodities have risen substantially, adding to cost pressures across the economy. With inflation climbing, the Bank of England is now considered unlikely to cut interest rates as previously anticipated; rate hikes are back on the table, which would further dampen economic activity.
The government has responded with a multi-pronged strategy. Rather than repeat the universal subsidies of the 2022 energy bailout — which cost £40 billion — ministers are focusing on more targeted support. Plans include means-tested packages and a “fuel allowance” for next winter for vulnerable households. To shore up supplies, the government has released 13.5 million barrels of oil from strategic reserves. At the same time, it is pushing to accelerate renewable and nuclear energy projects, lift the ban on onshore wind, and streamline grid connections. The Competition and Markets Authority (CMA) has been given enhanced powers to monitor fuel prices and crack down on profiteering, and is conducting a market study into heating oil prices. There are also calls to prioritise domestic energy production, including accelerated approval of North Sea projects such as Rosebank and Jackdaw.
The crisis is also exposing vulnerabilities in other sectors. The UK faces a shortage of aviation fuel, partly due to refinery closures and reliance on imports, including jet fuel made from Russian oil. Disruption to fertiliser production in the Persian Gulf has driven up fertiliser prices, threatening future crop yields. And Qatar’s reduced helium production — around 30% of global supply — is hitting industries from semiconductor manufacturing to medical imaging.
Comparisons to the 1970s energy crisis are inevitable. The current situation combines acute supply shortages, currency volatility, rising inflation, and the threat of stagflation and recession. Economic studies show that a 10% increase in oil prices driven by supply disruptions typically reduces UK GDP by 0.12%, but the current shock is far more severe and is hitting an economy already in a weakened state.
Longer-term, the crisis has renewed debate about energy security. Renewables already accounted for 50.4% of UK electricity generation in 2024, and the government has set targets of 50 GW of wind by 2030 and 70 GW of solar by 2035. Some see the crisis as a catalyst for an accelerated transition, though there are concerns about the immediate impact of green investments on consumer bills. Nuclear power is also being treated as a strategic priority, with calls for better coordination between civil and defence programmes. Meanwhile, the UK energy sector is strengthening its cyber security amid heightened geopolitical risks.
What the Experts Say
MoneyWeek’s editors are closely covering the unfolding situation. In the latest episode of MoneyWeek Talks, senior editors Kalpana Fitzpatrick, Andrew Van Sickle and Cris Sholto Heaton break down what the oil crisis means for personal finances and investment portfolios. The episode, titled “What does the oil crisis mean for you?”, is available on YouTube and all major podcast platforms. The editors explain where the crisis could go next and what listeners should do to protect their savings. MoneyWeek Talks regularly features influential guests — from CEOs and entrepreneurs to economists and policymakers — offering insights on managing money, investing wisely and building wealth.
Stay Informed with MoneyWeek
For readers who want to stay ahead of the financial turmoil, MoneyWeek is offering six free issues of its magazine, promising “unparalleled financial insight, analysis and expert opinion you can profit from.” Readers can also sign up to Money Morning, a free twice-daily newsletter delivering the latest investment and personal finance news, market analysis, and money-saving tips. Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.
