Oil-price surge raises prospect of UK rate increases later in 2026

A renewed rise in oil prices is increasing pressure on the Bank of England to reconsider its interest-rate outlook, although economists broadly expect policymakers to keep the benchmark rate at 3.75% at their meeting on Thursday.

Brent crude rose above $100 a barrel on Thursday before easing to about $96 on Friday, according to reporting by The Guardian. The move followed renewed fighting involving the United States and Iran and came after Brent had traded near $71 earlier in July.

Higher oil and gas prices can feed into inflation through household energy bills, transport and the cost of moving goods. Economists cautioned, however, that the eventual effect will depend heavily on how long the energy shock lasts and whether businesses pass higher costs to consumers.

The Bank’s nine-member Monetary Policy Committee is expected to vote seven to two to leave rates unchanged this week. Two members also backed an increase at the committee’s June meeting.

Several analysts said a sustained oil price above $90 or $100 could alter that calculation later in the year. Nomura economist George Buckley said market pricing implied as many as two quarter-point increases if oil remained near $100. Other economists argued that weak demand could limit the pass-through into underlying inflation and allow the Bank to keep rates steady before resuming reductions next year.

The forecasts are scenarios rather than policy decisions. The Bank has not announced an increase, and the outlook could change quickly if energy prices retreat or the conflict de-escalates.