Just when we all thought it was safe to look at our bank balances, the world has decided to turn into a high stakes action movie. The conflict involving the US, Israel, and Iran is not just a disaster for global peace, it is also a massive pain for your wallet. Donald Trump might have chatted about a ceasefire, but negotiations went about as well as a lead balloon. Now, the rest of us are left picking up the bill for a war we did not start.
From petrol pumps in London to grocery stores in New York, the economic ripples are turning into a bit of a tidal wave. If you feel like your money is disappearing faster than usual, you are not imagining it. Global crude prices are bouncing around like a toddler on a sugar rush, and that means everything else is getting more expensive.
Fuel for Thought
Drivers around the world are currently being robbed at the pump. In the UK, petrol has jumped by over 25p a litre since this mess began, while diesel is nearing the £2 mark. If you have a family car, you are basically paying for a fancy dinner just to fill the tank. Experts say that for every $10 oil goes up, you pay about 7p more at the pump.
Motoring groups are telling us to drive more gently, which is easy to say until you are stuck in a traffic jam. They suggest avoiding hard braking or fast acceleration to save fuel. It is great advice, but it won’t stop the fact that transport costs are making your weekly food shop feel like a luxury shopping spree. When it costs more to move a potato from a farm to a shelf, you end up paying for it.
Mortgages and the Moving Goalposts
Before this war kicked off, there was a nice little dream that interest rates might actually go down. Well, wake up, because the opposite is happening. Lenders are getting nervous and raising rates faster than a nervous twitch. In the UK, the average two year fixed rate has jumped from 4.83% to nearly 6%.
It is the same story globally. Banks are pulling deals off the shelves because they have no idea what is coming next. If you are looking for a new mortgage or a loan, you might find the options are a bit thin on the ground. Choice is a wonderful thing, but there are now about 1,500 fewer mortgage products available than there were just a few weeks ago.
Energy Bills and Holiday Blues
Energy prices are also set for a nasty spike. While some countries have price caps to protect people for a few months, the long term outlook is fairly grim. Millions of households could see their bills rise by hundreds of pounds by the summer. If you live in a rural area and rely on heating oil, you are already feeling the pinch because there is no cap to save you.
Even your summer holiday is under threat. Jet fuel prices have shot up, which means airlines will eventually pass those costs on to you. Flights will get more expensive, and some routes might disappear entirely. You might find that your dream trip to the sun turns into a long weekend in the back garden with a paddling pool.
The New Normal
Inflation was supposed to be cooling down, but this conflict has thrown a massive spanner in the works. While we probably won’t see the double digit madness of 2022, life is certainly not getting cheaper. Most working age households can expect to be about £480 worse off this year.
Central banks like the Bank of England are now stuck. They wanted to cut rates to help the economy, but they might have to raise them instead to keep prices under control. It is a bit of a mess, and unfortunately, we are all stuck in it.
Will you be cancelling your summer plans to pay for your heating, or are you hoping that the world leaders finally find their senses?
Related topics: Money
