UK inflation accelerated to 3.3% in March, propelled by surging fuel and energy prices following the outbreak of conflict in the Middle East, according to provisional figures released by the Office for National Statistics on Wednesday.
The increase marked a notable rise from the 3% annual rate registered in February, matching expectations from economists surveyed by Reuters, and signaled the first tangible effect of the Middle East conflict on UK consumer prices.
The ONS attributed most of the inflation jump to the largest increase in fuel prices seen in over three years. Higher airfares and rising food costs also contributed to inflationary pressures in March, while a modest rise in clothing prices partially offset the gains elsewhere.
Upward pressure was not confined to consumer goods—factory gate prices and input costs for manufacturers also moved sharply higher, predominantly due to elevated crude oil and petrol prices.
Prior to the tensions in Iran that began in late February, analysts expected inflation in the UK to cool further, potentially allowing the Bank of England to consider lowering interest rates as consumer price growth approached the 2% target. However, as a net energy importer, the UK economy is particularly sensitive to international energy price shocks. The renewed surge in global energy costs has complicated the outlook for the central bank’s policy stance.
Recent remarks from economists indicate skepticism that the Monetary Policy Committee will raise rates at its upcoming meeting on April 30, given that much of the inflation spike can be traced to external energy price swings.
While financial markets have priced in the possibility of one or two small interest rate increases this year, a majority of economists surveyed by Reuters anticipate the Bank of England will hold rates steady for the remainder of 2026, as policymakers weigh the risk of weak domestic demand alongside inflationary pressures.
Latest figures from the ONS also revealed that the rate of services inflation, a key metric monitored by the central bank, edged up to 4.5% from 4.3% in February—mainly attributed to increased airfares due to the timing of Easter. At the same time, core inflation—which strips out volatile categories such as energy, food, alcohol, and tobacco—eased slightly to 3.1%.
Looking ahead, official forecasts now suggest inflation could climb further, with some estimates indicating a peak of around 4% later in the year if energy prices remain elevated. Policymakers, however, have emphasized it is too early to determine whether recent increases in headline inflation will translate into broader and more persistent price growth.
The outcome will likely hinge on the evolution of the geopolitical situation, with the recent extension of a ceasefire in Iran by U.S. President Donald Trump bringing some temporary relief, but the scheduling of further peace talks remains uncertain.
