UK Inflation Hits 2.9% as Energy Costs Soar Amid Iran Conflict

UK inflation climbed to its highest level since March at 2.9% in July, driven by soaring household energy costs linked to the Iran war.

The Office for National Statistics (ONS) reported that Consumer Prices Index (CPI) inflation rose from 2.6% in June to 2.9% in July, with prices increasing 0.3% during the month compared to a 0.1% rise in July last year.

The biggest upward pressure came from housing and household services after Ofgem raised its energy price cap by 13% for July through September, increasing the annual cost for a typical dual-fuel household by £221 to £1,862.

The Iran conflict and tight European gas storage have contributed to higher wholesale energy prices, which will likely continue to impact inflation. Cornwall Insight forecasts another 4% increase in the energy price cap from October, with some estimates suggesting it could rise to around £1,941 on a like-for-like basis.