Middle East Conflict Sends Oil Prices Soaring Above $100 a Barrel

Disruptions to Saudi Arabia's energy infrastructure and key shipping routes have sent oil prices soaring again, raising concerns that higher energy costs could add to inflationary pressure worldwide.

The latest disruptions have led to a surge in crude oil prices above $108 a barrel, compared to around $70 in June. Petrol and diesel prices have also increased significantly, with the average petrol price exceeding 170 pence per litre in the UK, its highest level since 2022.

The Strait of Hormuz, one of the world's most important energy shipping routes, has seen a significant decline in traffic due to attacks on commercial vessels and energy facilities in the Gulf region. The pipeline shutdown has added to concerns about global oil supplies, with estimates suggesting that oil flows through Hormuz have fallen by over 60%.

Economists warn that prolonged high energy prices can raise living costs and slow economic growth. A study by the IMF found that a 10% increase in global oil prices typically raises inflation by around 0.4 percentage point in the short term, while the Bank of England estimates that a 10% increase could raise UK consumer-price inflation by around 0.5% at its peak.