Iran battle sends petrol costs hovering – with Rachel Reeves set to fulfill gas bosses for disaster talks at the moment

Petrol prices have soared as the Iran war continues to threaten the global supply chain, with the Chancellor to meet energy bosses for crisis talks today.

The average price of diesel reached 158.24p on Friday, while petrol hit 140.15p per litre. 

It comes as oil surged to more than $100 per barrel on Thursday, the second time fuel has reached the grim milestone in recent days, with fears the conflict will lead to higher energy prices and drive inflation for families in the UK.

Since the outbreak of war in the Middle East between Iran and the US and Israel, the Islamic Republic has ‘closed’ the Strait of Hormuz, a vital shipping lane through which around a fifth of all global oil and liquid gas travels. 

Iran has threatened all vessels passing through the strait and conducted a series of drone strikes on tankers, with six assaults in the last 24 hours, according to UK Maritime Trade Operations centre. 

As of Friday morning, Iran had attacked 18 ships in the region.

Responding to the turmoil, which is already pushing up fuel prices and is expected to result in a hike in energy costs, Chancellor Rachel Reeves has warned she will not tolerate profiteering ahead of a meeting with energy and petrol suppliers later. 

She and Energy Secretary Ed Miliband will sit down with representatives from the firms at Downing Street.

Reeves is expected to warn against ‘rip-off’ prices and tell bosses to ensure drivers are not left paying ‘over the odds’ for fuel. 

She has already asked the Competition and Markets Authority (CMA) to crack down on extortionate prices amid concerns of profiteering in the industry.

Ahead of Friday’s meeting, Reeves said: ‘I will not tolerate any company exploiting the current situation to make excess profits at consumers’ expense. I’m backing drivers and families – and I expect a fair deal at the pump.’

But costs are varying wildly, with one petrol station in Chelsea, London, reportedly selling petrol for as much as 238.7p per litre on Thursday.

Diesel at the Gulf premises was being sold for 264.9p per litre, the Standard reports. 

According to the RAC, since the outbreak of conflict two weeks ago petrol prices in Britain have risen by more than five per cent, with diesel up 11 per cent. 

Around the world price hikes are even more severe, with the cost of diesel up 44 per cent in Germany, figures showed this week. 

Juliette Enser, the CMA’s Executive Director for Markets, said: ‘Whilst price increases might be inevitable because of rising wholesale costs, it is important that those increases reflect genuine cost pressures.

‘We will be closely scrutinising and reporting on what’s happening with fuel prices and call out any concerning behaviour.’

Speaking on Friday, Foreign Secretary Yvette Cooper said Iran and Russia are working together in an attempt to ‘hijack the global economy’ amid rising oil costs.

Speaking during a visit to Saudi Arabia, the Foreign Secretary linked the threat from Iran to that from Russia, a key ally of Tehran.

She said: ‘We have seen these links between Russia and Iran over an extended period of time.

‘We’re seeing it in terms of technology, we see it in terms of the approach, we see it in terms of these kinds of tactics, and we see it in terms of the way these two states try to support each other and try to benefit together from attempting to hijack the global economy.’

She added: ‘We are very clear about the threat from both Russia and from Iran to the global economy and to all of our wellbeing.’

The US this week announced a temporary waiver lifting restrictions on the purchase of Russian oil and petrol already at sea in a bid to tackle rising prices.

But UK Energy minister Michael Shanks today indicated the UK would not follow suit and warned against doing anything that will help Vladimir Putin‘s ‘war machine’ against Ukraine. 

Touring broadcast studios this morning, he did not directly criticise the US decision.

But he told Sky news: ‘The UK has been really clear that our sanctions on Russia stay in place. And look, this is a moment where I suspect in the Kremlin they are looking at this as an opportunity to fix some of their ailing economy.

‘That is a great shame, because we have to do everything that we possibly can to make sure that we are bringing all pressure to bear on Russia so that we can win this war in Ukraine.

‘We will keep up our sanctions, and we’ll continue to do what we are doing around the shadow fleet, and we’re not going to change our position on that at all.

‘It’s really important that we don’t do anything that can assist the Russian war machine right in the middle of a really critical moment in this conflict against Ukraine.’

The price spike at the pumps means the government is under increasing pressure over plans to hike fuel duty later this year.

The Chancellor previously pledged to phase out a 5p cut to the tax, which was put in place following Russia’s invasion of Ukraine, from September. 

Fuel fears arose as the UK economy stagnated in January, new figures have shown, recording no growth in GDP – after a 0.1 per cent growth in December.

Most economists had expected growth of 0.2 per cent in January. 

Independent fiscal watchdog the Office for Budget Responsibility (OBR) warned earlier this week a sustained spike in energy prices driven by the US-Israel war with Iran could mean UK inflation ends the year one percentage point higher than expected, at close to three per cent.

It had already lowered its growth forecast for this year to 1.1 per cent from 1.4 per cent in the recent spring statement, even before the Iran conflict began.

Reeves said: ‘Our economic plan is the right one, but I know there is more to do.

‘In an uncertain world, we are building a stronger and more secure economy by cutting the cost of living, cutting national debt and creating the conditions for growth to make all parts of the country better off.’

Reacting to the latest economic figures, Conservative leader Kemi Badenoch accused the Prime Minister of being ‘distracted’ in a post which did not mention the Iran war.

She said: ‘Britain’s economy is flatlining, battered by Labour’s taxes and regulations. 

‘Keir Starmer isn’t thinking about economic growth, he’s too distracted by the Mandelson scandal and clinging on to his own job. 

‘We need to cut spending, cut taxes and get Britain working again.’ 

Thomas Pugh, chief economist at RSM UK, said the Middle East crisis raises the spectre of so-called stagflation – a combination of rising inflation and a stagnant economic performance – or even recession if prices keep soaring.

He said: ‘If energy prices stay around current levels, another bout of stagflation looks likely, with growth slipping to around 0.5 per cent this year.

‘If energy prices move even higher, in a similar way to 2022 a recession looks more likely, given the weaker labour market and tighter starting point for monetary and fiscal policy.’

With growing uncertainty around how the conflict in the Middle East will end, there are fears prices could rise even further.

On Wednesday, a spokesperson for Iran’s Revolutionary Guards threatened the cost of oil could reach $200 per barrel before the war is over.

‘You will not be able to artificially lower the price of oil. Expect oil at $200 per barrel,’ the spokesperson said in a statement. 

‘The price of oil depends on regional security, and you [the US and Israel] are the main source of insecurity in the region.’ 

Currently the international standard, Brent crude oil, remains over $100 – around £75 – per barrel, having peaked as high as $120.

The price pressure is also down to attacks on oil infrastructure in the region, with oil fields targeted in addition to military assets and bases.

Energy Secretary Ed Miliband said: ‘Tackling the cost of living is our number one priority – all fuel retailers must sign up for Fuel Finder so drivers can find the cheapest price at the pump.

‘We will not hesitate to act to protect consumers against any unfair practices.’