Late developments: The governor of the Bank of England has said that the “longer” the war in the Middle East continues the “larger” the effects on the UK economy.
Andrew Bailey told LBC’s Tonight with Andrew Marr show:
‘Well, the longer it goes on, I’m afraid to say, but it is rather an obvious point, the effect will be larger. So, I think that’s why it’s imperative that, as I know the government is doing, that everything is done that can be done to alleviate this effect. That’s the critical thing.’
Bailey also said that the best thing for the world economy would be to reopen energy supply lines, “because that is in the best interests of the people of the world.”
FTSE 100 falls 2.35%
And finally, the UK stock market has posted its biggest daily drop in over two weeks.
The blue-chip FTSE 100 index has closed down 242 points, or -2.35%, at 10,063 points.
That’s its biggest one-session decline since 3 March, in the first week of the Iran war.
Housebuilder Barratt (-8.4%) was the top faller, reflecting forecasts of UK interest rate rises this year which would hurt demand for new homes.
Banks also weakened, with NatWest down 8%.
The Bank of England has had a “crude awakening”, points out Deutsche Bank economist Sanjay Raja, as the rise in energy prices threatens to push up inflation.
Raja has abandoned his previous forecast for interest rate cuts this year, telling clients:
Policy risks are now one-sided. We are changing our BoE call. We no longer expect any rate cuts this year. We expect Bank Rate to stay put at 3.75% for the remainder of the year. And the prospect of rate hikes can no longer be discounted. The bar for rate hikes, we think, has fallen meaningfully – contrary to our previous view.
What will it take for the MPC to hike rates? One, limited fiscal support to curb inflation. And two, duration of the Iran conflict lasting into April (and beyond), extending the length of the inflation shock. Should fears of second-round effects ratchet higher, the case for a policy pivot in Q2-26 will likely strengthen. We will be monitoring this closely.
America’s Russell 2000 index of smaller companies has also been caught up in today’s market slide.
The Russell 2000 is down 0.7%, having briefly touched a 10% loss from its all-time intraday high earlier in the session.
Afternoon summary
Time for a recap….
A turbulent day in the financial markets has seen energy prices surge, and European stock markets fall.
UK and European gas prices have jumped 15% today, after yesterday’s attacks by Iran on energy infrastructure across the Middle East.
QatarEnergy has revealed that Iran’s strikes have damaged facilities responsible for producing 17% of the company’s LNG export capacity, and it could take three to five years to repair the damage.
Brent crude jumped by 10% at one state – extending the gap between Brent and US oil – before slipping back to $110 a barrel, up 3.3% today.
With anxiety over a lengthy period of disruption to energy supplies growing, European stock markets have tumbled. The UK’s FTSE 100 share index fell by almost 3% at one stage, dipping below the 10,000-point mark for the first time since early January.
European airline chiefs have warned that a prolonged conflict in the Middle East would lead to higher air fares as flight cancellations drive up costs and aviation fuel prices.
UK energy bills are on track to jump this summer too.
Faced with this disruption, central bankers are choosing to leave interest rates on hold until the situation is clearer.
The Bank of England maintained UK interest rates at 3.75% today, but also signalled that it could be forced to increase borrowing costs within the coming months.
It warned:
Conflict in the Middle East has caused a significant increase in global energy and other commodity prices, which will affect households’ fuel and utility prices and have indirect effects via businesses’ costs. Prior to this, there had been continued disinflation in domestic prices and wages. CPI inflation will be higher in the near term as a result of the new shock to the economy.
The BoE now believes the US-Israel war on Iran threatens to drive inflation in the UK above 3%, and is fearful of ‘second round’ effects – a jump in wages, and prices in the shops.
The City money markets are now pricing in two rises in UK interest rates this year, which would lift them back to 4.25% by December.
Andrew Bailey, governor of the Bank, has pushed back against such forecasts, saying:
“I would caution against reaching any strong conclusions about us raising interest rates.... Today we’ve given a very clear message. The right place to be is on hold.”
The Bank’s decision came hours after new data showed a slowdown in pay growth across the UK:
The European Central Bank left its interest rates on hold today too, as did Switzerland and Sweden this morning.
The World Trade Organisaion has cut its forecast for trade growth this year, and warned that an extended period of high oil prices could “crimp” the AI boom.
The UK is to double tariffs on Chinese and other foreign steel in a bid to save its remaining plants from collapse.
Berenberg economist Andrew Wishart reckons the future direction for UK interest rates is still down, not up:
Beware of whiplash: The Bank of England’s (BoE’s) hawkish shift in tone does not mean an interest rate hike is next.
Yes, the BoE removed its bias towards rate cuts. Whereas in February it said “Bank Rate is likely to be reduced further” now it “stands ready to act as necessary” to ensure that inflation meets the 2% target in the medium term. Nonetheless, investors responded by pricing in at least two interest rate hikes this year.
The shift will immediately tighten financial conditions by raising the interest rates available on fixed-rate mortgages and corporate loans. In our view, this will help to ensure demand is too weak for a new price-wage spiral to form, and that the future direction of interest rates is down, not up.
Updated
Analysis: BoE delivers message Britons don’t want to hear
The US-Israel attack on Iran has already driven prices higher and not just at the petrol pumps, the Bank of England said on Thursday in a gloomy assessment of the UK’s economic outlook.
An inflation rate that was on track to fall from 3% to the Bank’s 2% target in the coming months is now expected to rise to 3.5%. That is one probable impact of the US and Israel’s war on Iran.
Higher transport and energy costs can quickly flow through to higher food prices, ratcheting up the consumer prices index when the previous trajectory was down.
It is not the news households wanted to hear after a long period of high inflation that everyone thought was over.
Likewise, businesses large and small will be reconsidering their investment decisions and how many people they hire as a result.
For the government, another rise in the cost of living is the last thing it needs heading into already difficult local elections…
More here:
European gas prices have slipped back a little from their earlier highs, but are still on track for significant gains today.
The UK month-ahead gas contract is up almost 15% at 160p a therm, having hit 175p this morning.
The continental European month-ahead gas contract is up almost 16%, at €63.2 per Megawatt hour.
Traders will have noted the news that Iran’s strikes on Qatar damaged facilities responsible for producing 17% of the company’s LNG export capacity (see earlier post).
CEBR: UK energy bills on track to top £2,100
UK energy bills are on track to exceed £2,100 per year, according to consultancy CEBR, due to the surge in oil and gas prices this month.
That would be a steep increase on the latest energy price cap, of £1,641 a year from April-June.
CEBR has calculated that the quarterly cap will rise sharply when it is next set (it is calculated from wholesale energy prices), saying:
The latest developments in the Middle East, including the recent strike on the Ras Laffan export facility, have pushed up wholesale energy prices. At current levels, this implies a Q3 Ofgem price cap exceeding £2,100 if sustained, with higher bills likely even if prices ease. The conflict is also expected to shave around 0.1 to 0.3 percentage points off UK GDP growth over the next year.
Gap between US crude and Brent has widened in crisis
Global oil prices have surged in response to escalating military aggression against key energy infrastructure in the Gulf - but in the US oil prices have barely budged in what could prove a double blow to Asian economies.
The widening gap between the international benchmark, Brent crude, and the US oil price known as the West-Texas Intermediary (WTI) has reached an 11 year high as traders begin to weigh the differing fortunes of world regions in response to the global energy supply shock.
The price of Brent has climbed by over 10% to over $119.13 a barrel earlier today, close to the peak touched on March 9, fuelled by fears that attacks on the Gulf’s regional infrastructure could prolong the supply crisis facing the Gulf’s biggest energy buyers in Asia and Europe. It’s now up 4% at $111.62/barrel.
But in the US, the world’s biggest energy producer, the WTI is up just 1.7% at $97.95 a barrel, reflecting the economy’s strong domestic production and strategic reserves.
While Brent crude typically trades at a premium to the WTI, the current oil price shock risks turning the crisis “into a regional wrecking ball”, according to asset manager Stephen Innes. Economies in Asia and Europe will be forced to weather higher outright oil prices relative to the US, but also contend with a stronger US dollar which makes buying oil on the dollar-denominated market even more expensive.
Innes said:
“If escalation continues, the next phase is not just higher oil but enforced behavioral change, where demand is rationed through price and inflation becomes embedded rather than episodic. That is when the shock evolves from a market event into an economic regime shift.”
The UK interest rate predictions market has calmed down slightly, since Bank of England governor Andrew Bailey suggested investors were getting over-excited in their predictions for higher interest rates.
The market is still fully pricing in one hike by June, and a second one in September.
But the prospect of a third rate rise has vanished from the money market pricing screen.
Paul Dales, chief UK economist at Capital Economics, told clients that the BoE is leaning a bit more towards rate hikes rather than cuts, adding:
That said, in an unusual move presumably in response to the markets pricing in 75 basis points of rate hikes, 100 minutes after the policy announcement Governor Bailey was quoted as saying “I would caution against reaching strong conclusions about us raising interest rates” and that “the markets are getting ahead of themselves in assuming rate rises”.
Prolonged high oil prices could ‘crimp’ AI boom, WTO warns
An extended period of high oil prices as a result of war in the Middle East could “crimp” the AI boom, the World Trade Organization’s chief economist has warned.
The war and its impact on energy and fertiliser costs is the main risk to the global economy identified in the WTO’s latest Global Trade Outlook.
But the Geneva-based body also raised a question mark about the continued strength of AI investment, which in 2025 helped to offset the hit to global trade from Donald Trump’s tariffs.
The WTO has cut its forecast for growth in world trade in goods to 1.9% this year, down from 4.6% in 2025.
And it warned that the slowdown could be even sharper; if crude oil and liquefied natural gas prices remain high throughout 2026 due to the conflict, global trade in goods could slow further to 1.4%, WTO economists said.
BoE's Bailey: I'd caution against strong conclusions about rate hikes
Bank of England governor Andrew Bailey has suggested the financial markets might be getting carried away by forecasting several UK interest rate rises this year.
Speaking after rate hike expectations rose sharply this afternoon, Bailey told the BBC that traders shouldn’t reach "any strong conclusions” about the path of borrowing costs.
In a suggestion that financial markets are getting ahead of themselves, Bailey said:
“I would caution against reaching any strong conclusions about us raising interest rates.... Today we’ve given a very clear message. The right place to be is on hold.”
Wall Street joins the sell-off
There are losses on the New York stock market at the start of trading, but rather more modest than in Europe today.
The Dow Jones Industrial Average has lost 205 points, or 0.44%, in early trading to 46,020 points. It contains 30 large US companies.
Boeing (-3.4%) and Caterpillar (-2.6%) are the biggest fallers, as investors anticipate a protracted period of energy disruption which would hurt demand for airlines and construction equipment.
The broader S&P 500 share index has dropped by 0.5%.
In contrast, Europe’s Stoxx 600 index is down almost 2.5% today, after Japan’s Nikkei shed 3.4% overnight.
Iran attack damage wipes out 17% of Qatar’s LNG capacity for three to five years
NEWSFLASH: Iran’s attacks on Qatar have damaged facilities that produce 17% of QatarEnergy’s liquefied natural gas export capacity, and it could take several years to repair the damage.
That’s according to QatarEnergy CEO Saad al-Kaabi.
Speaking to Reuters a day after the attack on Ras Laffan, Qatar’s huge industrial complex, al-Kaabi suggested it could take three to five years to repair them, meaning it may not be able to meet contracts over that time.
👀
— Ed Conway (@EdConwaySky) March 19, 2026
EXCLUSIVE- QATARENERGY CEO TELLS REUTERS: WE MAY HAVE TO DECLARE FORCE MAJEURE ON LONG-TERM CONTRACTS FOR UP TO FIVE YEARS FOR LNG SUPPLIES TO ITALY, BELGIUM, KOREA AND CHINA
- From Reuters.
This is bad.
He says:
“I never in my wildest dreams would have thought that Qatar would be - Qatar and the region - in such an attack, especially from a brotherly Muslim country in the month of Ramadan, attacking us in this way.”
Updated
European countries and Japan: ready to help on Hormuz, stabilise energy markets
Now this is interesting….
Britain, France, Germany, Italy, the Netherlands and Japan have said they will take steps to stabilise energy markets and were ready to join “appropriate efforts” to ensure safe passage through the Strait of Hormuz.
In a join statement, the countries also condemned attacks by Iran and called on it to halt its actions immediately.
They say:
“We express our readiness to contribute to appropriate efforts to ensure safe passage through the Strait.
We welcome the commitment of nations who are engaging in preparatory planning.”
The statement also welcomed the release of strategic petroleum reserves, adding:
“We will take other steps to stabilise energy markets, including working with certain producing nations to increase output.”
Why the Bank of England is really worried
The Bank of England’s MPC is “really worried” about the inflationary impact of the oil shock, Professor Costas Milas of the Management School at University of Liverpool tells me.
Professor Milas explains:
To see this, I plot the impact of the oil shock (assuming oil prices stay at their current level for a while rather than dropping fast or even...rising further).
UK inflation rises by up to 1.5 percentage points by the end of the year and reaches a peak in early 2027. The impact is statistically significant (using a 95% confidence interval) in a model of oil prices, inflation, UK growth and Bank Rate. This is clearly a nasty oil price shock...
ECB leaves eurozone interest rates on hold and hikes inflation forecasts
The European Central Bank has voted to leave eurozone interest rates unchanged.
Announcing its decision, the ECB says it is “determined to ensure that inflation stabilises at the 2% target in the medium term”.
The eurozone central bank warns:
The war in the Middle East has made the outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth.
It will have a material impact on near-term inflation through higher energy prices. Its medium-term implications will depend both on the intensity and duration of the conflict and on how energy prices affect consumer prices and the economy.
It has also lifted its inflation forecasts, due to the Middle East war. Headline inflation is now expected to average 2.6% in 2026, 2.0% in 2027 and 2.1% in 2028.
Back in December, the ECB had forecast inflation would be 2.2% in 2026, 1.9% in 2027 and 2.0% in 2028.
FTSE 100 share index dips below 10,000 points
The stock market selloff is accelerating in London.
Almost 3% has been wiped off the blue-chip FTSE 100 share index so far today. It just fell below the 10,000 point mark, hitting 9997.41 points, its lowest since 8 January, before struggling back to 10,004 points…
Apart from BP (+2.5%), every share on the index is down today.
Precious metal producers Fresnillo (-9.2%) and Endeavour Mining (-9%) are leading the sell-off, with banks, and mining companies also among the top fallers.
Before the Iranian war began, the FTSE 100 hit 10,934 points – so it’s lost 8.5% of its value since, hitting the value of pension funds and ISAs across the UK.
Updated
The market panic caused by the Middle East crisis is continuing to ripple across assets today.
Silver has tumbled by almost 11% to $67.1 an ounce.
Gold is down 5.7% at $4,539 an ounce.
Two-year bond yields on track for biggest jump since 2022 mini-budget crisis
UK government bond prices are being hammered by City traders, following the Bank’s warning that the energy crisis could create ‘second round’ effects to push inflation higher.
With prices falling, the yields (or interest rate) on UK gilts are pushing sharply higher.
Shorter-dated UK bonds are particularly hit.
The yield in two-year gilts have jumped by 35 basis points (0.35 of a percentage point) to 4.47%, the highest since January 2025.
That puts them on track for the biggest daily increase since Liz Truss’s “mini-budget” crisis of September 2022.
The Bank of England MPC must have had one of their most difficult meetings, before deciding to leave rates unchanged today, suggests Michael Browne, global investment strategist at Franklin Templeton Institute.
He writes:
What should they do in the face of a very real inflationary threat? As we dust off the 2022 playbook, we know the damage energy driven inflation can inflict - but to use the Scottish legal term, it is not yet proven.
“Last night, US markets sold off sharply after [Federal Reserve] chairman Powell failed to sound tough enough. Bond markets are nervous and need reassurance that monetary authorities are on top of their brief and prepared to raise interest rates sooner rather than later.
The minutes suggest the MPC is very alive to the risks and while that may not be enough for the market today, investors should be re-assured that they will act, even though a rate rise would be bad news for the economy.”
In the parallel universe where the US and Israel didn’t attack Iran on 28 February, we’d probably be talking about a cut to interest rates today.
Just before the war, a rate cut today was seen as an 80% chance by the money markets.
Bank deputy governor Sarah Breeden says she would have expected to vote for a cut today, has circumstances not changed:
Conflict in the Middle East has significantly shifted the outlook for inflation. Absent this shock, the underlying disinflation process had continued broadly as I expected and, consistent with my vote in February, I would have expected to vote for a cut again in March. But the conflict will have a significant, though at this point highly uncertain, impact on inflation.
Updated
Why are mortgage rates going up when the Bank of England base rate hasn’t changed?
Although the Bank of England has left rates on hold today, mortgage rates have been rising since the Iranian war began.
Here’s why:
Bank now expected to raise interest rates twice this year
City traders are betting that the Bank of England will raise UK interest rates at least twice this year, to combat the inflationary hit from the Middle East crisis.
The money markets are now fully pricing in a quarter-point rise in Bank rate, to 4%, by June.
A second hike, to 4.35%, is fully priced in by September.
These implied interest rates are volatile today, though.
Traders are reacting to the Bank’s prediction that inflation will average 3% in the second quarter of this year, not fall to 2.1% as previously expected (see here).
They are also noting its concern about the risks of “second-round effects in wage and price-setting” – that high energy bills will lead to higher wage demands, and higher prices in the shops.
Updated
BoE governor: I will be monitoring developments extremely closely
The governor of the Bank of England, Andrew Bailey, is worried that households and businesses may be “more sensitive” to an inflationary shock, having recently experienced one after Russia’s invasion of Ukraine.
That looks to be a concern that firms and workers may react quickly to rising energy prices – by raising their own prices, or by seeking higher wages.
Bailey – who had been the ‘swing voter’ between the hawks and the doves at the Bank – says:
Large movements in energy prices have resulted from events in the Middle East and uncertainty over the duration of supply disruptions. Monetary policy cannot reverse this shock to supply. Its resolution depends on action taken at its source to restore the safe passage of shipping through the Strait of Hormuz.
Monetary policy must, however, respond to the risk of a more persistent effect on UK CPI inflation. A prolonged disruption to the supply of oil, natural gas and other commodities such as fertiliser and neon gas increases the upside risk to inflation. The recent experience of high inflation may also make households and businesses more sensitive to a new inflationary shock. At the same time, the starting point for this shock is a real economy with limited pricing power.
Holding Bank Rate at this meeting is appropriate. I will be monitoring developments extremely closely and stand ready to act as necessary to ensure that inflation remains on track to meet the 2% target in the medium term.
Bank's hawks and doves in rare agreement
It’s notable that both the hawks and the doves on the Bank of England all agreed to leave interest rates unchanged.
At previous meetings, there’s been a clear split between the hawks (who want higher borrowing costs to fight inflation) and the doves (who favour lower rates to support the economy).
The Bank has published views from all nine policymakers on the Monetary Policy Committee.
The hawkish Megan Greene warns that the Middle East conflict means “the risk of inflation persistence has risen, perhaps significantly”.
Greene points to the risk that energy, fertiliser and food prices all rise, pushing up households’ inflation expectations, adding:
I believe there may be a larger trade-off now than in 2022, but that the impact of this energy shock on inflation is paramount. It is appropriate to hold Bank Rate to learn more about the size and duration of the shock, and the extent of potential second-round effects.
Swati Dhingra, a dovish committee member, says the economic outlook is at “a crossroads” – and it all depends how high energy prices rise, and for how long.
Dhingra says:
In one scenario, we could see a more modest increase in energy prices which probably slows rather than derails disinflation as limited scope exists for significant pass-through and second-round effects, given the state of the labour market and broader domestic demand environment.
In another scenario, severe and longer-lasting constraints on oil and gas supply, alongside broader trade disruptions, could overwhelm orderly market adjustment. This could warrant a hold or increase in Bank Rate to stabilise price-setting dynamics albeit creating a difficult trade-off with activity following a prolonged period of weakness.
If we see something resembling the lower-inflation scenario, I would expect to reduce Bank Rate, possibly quickly, over the rest of the year. For now, there is value in pausing to reassess the balance of risks to inflation from the terms-of-trade deterioration.
Bank warns inflation could average 3% in April-June
The Bank of England has ripped up its previous forecasts that inflation would fall back to just above its 2% target this spring.
It now predicts that the Consumer Prices Index will be around 3% in the second quarter of this year, up from a previous forecast of a fall to 2.1%.
The Bank says:
CPI inflation had previously been projected to fall in 2026 Q2, as previous one-off price increases in April 2025 dropped out of the year-on-year comparison alongside the disinflationary effect of the 2025 Budget.
Given higher fuel prices, the decline between Q1 and Q2 was now projected to be modest. CPI inflation was expected to be around 3% in Q2 rather than 2.1% in the February Report.
Bank of England 'stands ready to act' to keep inflation on track
The Bank of England says it “stands ready to act” to ensure that UK inflation remains on track to hit its 2% target.
Announcing today’s decision to leave interest rates unchanged at 3.75%, it says there is a growing risk that higher energy bills leads to higher prices in the shops, and increased wage demands to compensate (which push inflation higher).
The Bank says:
Monetary policy cannot influence global energy prices but aims to ensure that the economic adjustment to them occurs in a way that achieves the 2% target sustainably. The MPC is alert to the increased risk of domestic inflationary pressures through second-round effects in wage and price-setting, the risk of which will be greater the longer higher energy prices persist. The MPC is also assessing the implications for inflation of the weakening in economic activity that is likely to result from higher energy costs.
The Committee will continue to monitor closely the situation in the Middle East and its impact on global energy supply and energy prices. It stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term.
Updated
Bank of England holds rates, and warns of 'new shock to economy' from Middle East crisis
Newsflash: The Bank of England has kept UK interest rates on hold at 3.75%, as it weighs up the impact of the Middle East conflict on Britain’s economy.
As expected, the Bank’s rate-setting monetary policy committee (MPC) voted by a majority to keep its key base rate at the current level of 3.75% (before the Iran war, a rate cut today had been widely predicted)
The decision is unanimous too; all nine policymakers on the Monetary Policy Committee agreed that rates should remain on hold.
The Bank is also warning that inflation will be higher in the “near term” due to the shock from higher energy prices.
It says:
Conflict in the Middle East has caused a significant increase in global energy and other commodity prices, which will affect households’ fuel and utility prices and have indirect effects via businesses’ costs. Prior to this, there had been continued disinflation in domestic prices and wages. CPI inflation will be higher in the near term as a result of the new shock to the economy.
Updated
Stocks are continuing to lurch lower in London.
The FTSE 100 is now down 217 points at 10,087 points, a fall of 2.1% today. That’s a two-month low.
In just five minute’s time, the Bank of England will announce its decision on interest rates.
The City is widely expecting the BoE to hold rates at 3.75%. The real interest is in what the Bank’s policymakers say about the energy price surge, and its impact on the UK economy.
Germany’s economy minister, Katherina Reiche, has warned that high energy prices could drive companies out of Europe’s biggest economy, as she expressed concern about the attacks on energy infrastructure in the Middle East.
Losses across European markets
European stock markets are down across the board this morning.
Germany’s DAX has dropped by 2.3%, France’s CAC 40 is down 1.7% and Italy’s FTSE Mib and Spain’s IBEX have both lost 2.2%.
The UK’s FTSE 100 is little better – now down 1.9% at 10,109 points (-196 points today)
Raffi Boyadjian, lead market analyst at XM, says:
The brief spout of optimism earlier in the week has dissipated as the conflict in the Middle East shows no sign of easing, while the gatherings of the world’s most important central banks have shunned the spotlight on the fresh inflation threat facing the global economy.
The overriding trend of higher energy prices and tighter monetary policy is making its mark again on the markets, with risk assets crumbling and gold succumbing to the US dollar’s strength, as investors struggle to see an end to the war.
Israel struck Iran’s South Pars gas field on Wednesday, which is the world’s largest natural gas field, triggering an angry retaliation by Tehran. Qatar’s Ras Laffan Industrial City – the largest LNG plant in the world – came under attack again, prompting an intervention by the US President.
Posting on his Truth Social platform, Trump attempted to diffuse the situation by distancing the US from Israel’s actions, saying America was unaware of those plans and that “no more attacks will be made by Israel” on South Pars. However, he also warned Tehran that any new strikes on Qatar’s LNG facility would be met by a strong response.
Updated
Ryanair CEO Michael O’Leary has predicted today that European tourists are likely to travel closer to home to cut flight times and avoid flying long-haul over the Middle East.
He was speaking at a news conference in Brussels where airline CEOs called on the EU to postpone its mandates for the use of synthetic sustainable jet fuel (eSAF).
RSM UK: Oil and gas price shock could push UK inflation to 5%
Today’s surge in oil and gas prices could push inflation up to 5%, if prices remain at these levels, predicts Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK.
He points out that higher energy prices could cause ‘second round effects’ (ie, leading to higher wage and price setting), saying:
“We’ve seen another surge in oil and gas prices this morning as attacks on energy infrastructure in the Middle East escalate the economic risks.
“If prices of around $117pb for oil and 173p/therm are maintained, higher energy prices would push to a little above 4% by the end of the year. However, that likely understates the total impact as second-round effects would become more likely and larger if energy prices were still this high into the summer, which could realistically push inflation towards 5%. At that point, interest rate hikes become much more likely.
Updated
Joumanna Nasr Bercetche of Bloomberg flags that China and India are the biggest buyers of Qatar’s LNG:
Who buys Qatar's LNG exports? pic.twitter.com/lrx4uUNsex
— Joumanna Nasr Bercetche (@JoumannaTV) March 19, 2026
Bank of England now expected to raise interest rates this year
City traders are betting that the energy crisis will force the Bank of England to raise UK interest rates this year.
The money markets are now fully pricing in a quarter-point raise by July, which would take Bank rate back up to 4%.
We’ll get a feeling for the Bank’s view of the situation at noon today, when it is expected to leave interest rates on hold.
Gary Smith, head of EMEA client portfolio manager team, fixed income at Columbia Threadneedle Investments, says:
Prior to the conflict in the Middle East markets were primed to expect a March rate cut from the BoE, but this pricing has evaporated – and we agree that the BoE will likely stay on hold this week.
The Monetary Policy Committee will want to wait for more clarity on the potential inflationary impacts of rising energy costs – for now this overshadows any domestic political dynamics or economic data.
The Bank will need to judge the energy price shock as “persistent” in order to justify a monetary policy response and given the current highly uncertain nature of the geopolitical backdrop, it is unlikely that the Bank can determine the nature of the shock at this juncture – which leaves it in “wait and see” mode.
European airlines warn surging energy prices will mean higher fares
Major European airlines warned of rising fares if the surge in fuel prices stemming from the Iran conflict persists for months, Reuters reports.
They have urged passengers to book early to avoid extra costs as the industry’s fuel hedging strategies – which they use to protect themselves from rising energy prices – start to unwind.
Lufthansa Group Carsten Spohr, speaking alongside other airline leaders in Brussels, said it had added 40 flights to Asia to compensate for disruption to Gulf carriers but demand could be affected by higher fuel charges and fares.
Brent crude is now up 10% so far today at $118.11 a barrel, as the renewed attacks on energy infrastructure in the Middle East alarm investors.
Updated
Greenpeace has responded to the attacks on gas infrastructure in the Persian Gulf, and the resulting spike in energy costs.
Maja Darlington, climate campaigner for Greenpeace UK, says:
“Last week we learned that one more big fossil fuel price shock like Ukraine would cost the UK more than the entire bill for getting to net zero.
The latest spike in gas prices makes Trump’s reckless, chaotic war look more and more like that price shock, and it won’t be the last one we experience if we stay hooked to fossil fuels. The UK has the resources to be self-sufficient in energy through renewables. Letting oil and gas stay in the mix means letting foreign wars control our energy bills.”
Ras Laffan attacks "fundamentally reshape global LNG outlook"
Yesterday’s missile attacks on Qatar’s Ras Laffan Industrial City have “fundamentally” altered the global gas market outlook, energy consultancy Wood Mackenzie are warning this morning.
Wood Mackenzie are warning that initial expectations of a two-month disruption at the site are now likely to be exceeded.
An extended outage risks tightening global supply, raising prices, and delaying capacity growth through 2028, they warn.
Wood Mackenzie point out that Qatari LNG production has been halted since 2 March, which removed around 19% of global LNG supply from the market, or 80m tonnes per annum.
An expansion of its “North Field East” site, which would have added 32m tonnes per annum, now faces potential delays, Wood Mackenzie fear, which could “reshape supply growth expectations through 2027-2028.”
Before the attacks, Wood Mackenzie had forecast it would take four to six weeks to ramp up Qatari LNG production to full capacity.
Kristy Kramer, head of LNG strategy and market development atWood Mackenzie, warns:
“Market expectations had been for a short disruption, with a controlled restart restoring supply to pre-conflict levels by mid-2026. That outlook now appears increasingly unlikely.
“A more prolonged outage would further tighten the global supply and keep prices elevated for longer.”
The Brent crude oil price is continuing to climb this morning.
It’s now up 8.8% today at $116.85 a barrel, approaching the three-and-a-half-year high of $119.50 set earlier this month.
Shell says attack on Ras Laffan damaged Pearl GTL facility
Shell has confirmed that Wednesday’s attack on Qatar’s Ras Laffan Industrial City caused damage to the Pearl GTL (gas-to-liquids) facility.
Shell added the fire was quickly put out, there were no reported injuries and Pearl is now in a “safe state”, after Iran attacked the facility in retaliation for the attack on its South Pars gasfield.
Shell has a 100% interest in Pearl GTL in Qatar, which has capacity to process up to 1.6 billion cubic feet per day of wellhead gas, converting it into 140,000 bpd of gas-to-liquids, Reuters reports.
Sky News’s Ed Conway has warned that the attack on Ras Laffan could have serious consequences, potentially for years:
Very, very bad news.
— Ed Conway (@EdConwaySky) March 18, 2026
As I wrote in Material World, Ras Laffan is one of the most important industrial sites not just in the Gulf but in the world. LNG, helium, other products. Massive.
Whatever happens next, serious damage to this site could reverberate for months, maybe years. https://t.co/72PGcL66IM
Interest rates on hold in Swizerland and Sweden despite energy shock
Two central banks just left interest rates on hold, even though the Middle East crisis is threatening to drive up inflation.
The Swiss National Bank has left its policy rate unchanged at 0%, and predicted that the rise in energy prices due to the escalation in the Middle East means inflation in Switzerland is likely to increase more strongly in the coming quarters.
The SNB warned traders it would intervene if necessary to keep the Swiss franc stable, saying:
Given the conflict in the Middle East, the SNB’s willingness to intervene in the foreign exchange market has increased. The SNB thereby counters a rapid and excessive appreciation of the Swiss franc, which would jeopardise price stability in Switzerland.
Sweden’s Riksbank has left its policy rate unchanged at 1.75%, cautioning that the war in the Middle East makes forecasting very uncertain.
The Riksbank said:
Recent international developments have been very dramatic. The war in the Middle East has caused major movements in energy prices and in financial markets, including a rise in short-term market interest rates. The US dollar has strengthened, including against the Swedish krona. It is still unclear what the more long-term consequences will be, in both geopolitical and economic terms, and conditions can change rapidly.
Key event
It’s a busy morning for BP as the crude prices surges higher.
The British energy major has announced the sale of its German oil refinery site in Gelsenkirchen to investment firm Klesch Group, and also raised its cost reduction target.
BP is now aiming for $6.5bn to $7.5bn of structural cost reductions by 2027, which equates to around 30 percent of bp’s 2023 cost baseline.
BP is also planning to shift its global headquarters to new offices in London by early 2028.
The new site – in London’s Southwark – will also house technical and engineering staff currently based in its Sunbury campus, to the west of the capital.
BP told Reuters in a statement:
“We are taking steps to build a simpler, stronger and more valuable bp, including bringing our teams and leaders closer together. This move will help us work smarter and faster, strengthen decision-making, and create more opportunities for meaningful in-person collaboration.”
FTSE 100 drops 1.6% amid energy fears
European stock markets have dropped sharply at the start of trading, hit by worries about surging energy prices.
In London, the FTSE 100 blue-chip share index has tumbled by 162 points, or 1.6%, to 10,142 points.
Nearly every share on the index is down, led by miners and banks, with BP (+1.6%) a rare riser.
Susannah Streeter, chief investment strategist at Wealth Club, says “downbeat sentiment is spreading fast” as investors assess the repercussions for the global economy.
“Fears of a sustained energy shock have resurfaced after the escalation in the Iran war sent oil and gas prices soaring. The prospect of a longer, more drawn-out conflict is in sharp focus, as both sides ratchet up attacks on energy infrastructure.
Brent crude remains highly volatile but has traded as high as $114 a barrel today, threatening to climb back towards recent scorching levels. Gas prices have surged by 25%, reaching a range not seen since early January 2023.
Updated
Iraq-focused oil and gas producer Gulf Keystone Petroleum has suspended its financial guidance this morning, citing “the deterioration of the regional security environment”.
Gulf Keystone, which has major operations in the Kurdistan region, told investors thiis morning it has placed its 2026 average production guidance of 37,000 to 41,000 barrels of oil per day under review until production at its Shaikan field resumes.
It temporarily stopped production at Shaikan, in the Kurdistan Region of Iraq, on 28 February, at the start of the Iran war.
Today it says:
The Company is ready to restart production and exports quickly with an improvement in the security environment.
Charts: How UK gas prices have hit three-year highs
This chart shows how UK gas prices have surged over 170p a therm today, as the Iran war has caused prices to more than double since late February.
That jump is likely to drive up household energy bills this summer, unless the Middle East conflict deescalates.
However, prices are still much lower than shortly after Russia’s invasion of Ukraine – when they briefly rose over 500p a therm.
Middle East conflict 'spooking the markets' as gas and oil prices jump
This morning’s surge in oil and gas prices, and the slowdown in UK wage growth, are the main things to watch in the markets today, reports Kathleen Brooks, research director at XTB:
Brent crude has hit $113 a barrel, one of its highest levels since the conflict began. The escalation in the conflict is spooking the market and futures markets are predicting hefty losses for stocks at the open, as risk sentiment sours. Oil is driving the bus in this market, and where it goes, risk sentiment will follow.
Nat gas prices are surging once more and are higher by 30% after the attacks on Qatar’s Ras Laffan gas field. This has caused President Donald Trump to call on Israel and Iran to stop targeting energy sites. However, it will take a lot of positive sentiment and news flow to calm energy prices today.
The UK labour market data was not as bad as feared, the unemployment rate remained steady at 5.2%, and the UK’s labour market was little changed at the start of the year.
There are signs that businesses are hiring once more, the ONS has reported an increase of 6,000 payrolled workers in January and estimates a further 20,000 payrolled workers were added in February. The vacancy rate is stable, with declines in smaller firms offset by increases in jobs in larger firms. This suggests that the jobs outlook improved at the start of the year compared to the end of 2025.
The big news is that UK wages retreated to their lowest level in 5 years, with pay growth slowing in both the private and public sectors. This is one bright spot in an otherwise weak outlook for UK inflation. Today’s data continues to support a BOE who is concerned about the outlook for growth. The Middle East conflict continues to dominate, and it will take a major deescalation at this stage to boost market sentiment and bring down energy prices.
UK wage growth was particularly weak once you account for inflation.
Real regular pay (adjusted by the consumer prices index) fell to just 0.5% in November-January. That’s the lowest since May to July 2023.
Annual real total pay growth (using CPI) fell to 0.7% in the quarter.
UK wage growth hits five-year low
UK wage growth has slowed to a five-year low, in a worrying sign for workers as the Middle East crisis pushes up energy costs.
Average pay (excluding bonuses) rose by 3.8% per annum in the three months to January, down from 4.1% in October-December 2025, the Office for National Statistics reports.
Annual growth in total pay (including bonuses) slowed to 3.9% in November-January, down from 4.2% a month earlier.
For both pay measures, this is the slowest growth since September to November 2020.
Today’s UK labour market report also shows the unemployment rate remained at a five-year high of 5.2%.
Luke Bartholomew, Deputy Chief Economist at Aberdeen, says:
“With unemployment staying steady at 5.2% and a rare gain in payrolls employment, this report paints a mildly more positive picture of the labour market. And with wage growth softer again, in normal times this would have been a relatively reassuring report for the Bank of England.
But the report feels stale in light of the Iran conflict, and the inflation risks stemming from the large spike in energy prices. So while today’s Bank of England meeting had once looked like the likely point of the next rate cut, instead policy is set to be kept on hold today as policymakers give themselves more time to see how the conflict plays out.
Negative supply shocks are difficult for central banks to navigate as they push up on inflation and down on growth at the same time. The dilemma is especially acute for the BoE right now as UK growth was already weak and inflation expectations were also less well anchored. So while we think the hurdle to returning to rate hikes is very high, further rate cuts may be significantly delayed.”
Updated
UK gas prices surge 25% as Middle East crisis escalates
European gas prices are surging this morning, after Iran stepped up attacks on energy facilities across the Middle East.
The month-ahead UK wholesale gas price has jumped by 25.5% this morning to 175p a therm, its highest level since August 2022, Reuters points out.
[see later post for key charts]
The continental gas price has rocketed too. The “front-month Dutch wholesale gas price” is up over 31% at €71.7 per Megawatt hour, its highest since the end of December 2022.
Traders are reacting to yesterday’s escalation in the Middle East, where Iran attacked the world’s largest liquefied natural gas facility in Qatar after Israel’s attack on its South Pars gasfield, the world’s largest.
In response, Donald Trump has threatened to “massively blow up” South Pars completely if Iran attacks Qatar again:
Updated
Oil up 6% today
The oil price is rising rapidly again today, adding to the headache facing central bankers.
Brent crude is up 5.9% at $113.76 a barrel, as tensions escalate in the Middle East.
Israel’s attack on Iran’s giant South Pars gasfield yesterday has shown that the war has escalated, with Iran’s Revolutionary Guards threatening to target oil and gas facilities across the region in response.
Introduction: Bank of England interest rate decision today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The world’s central bankers are facing a conundrum right now. With the Middle East crisis pushing up energy prices, inflation risks lingering, and economies looking weak, should they cut borrowing costs to support growth or raise them to subdue prices?
Rather than make a choice yet, there’s a strong temptation to wait and see.
And that’s why the Bank of England is expected to leave interest rates on hold at noon, after its latest monetary policy committee meeting.
Before the Iran conflict started, an interest rate cut today was seen as an 80% chance by the money markets. But now, with oil over $100 a barrel, the markets indicate there’s a 97% chance that the BoE leaves interest rates on hold at 3.75% today.
Ajith Nair, CIO of Isio Investment Management, explains:
“Expectations for UK interest rates have shifted materially in recent weeks, with markets now anticipating that the Bank of England will hold rates in March, keeping rates at 3.75%, despite previously pricing in a cut.
The primary driver has been the rise in oil and gas prices linked to the Iran conflict, which has pushed inflation risks higher. This creates a difficult backdrop for both policymakers and investors. In fixed income markets, UK government bonds have already come under pressure at times, with yields rising as rate‑cut expectations have been pared back and, more recently, partly restored. Shorter‑dated bonds are now reflecting a more uncertain path for policy rather than a straightforward easing cycle.
The European Central Bank is also expected to leave interest rates on hold today.
The Bank of Japan has got the ball rolling overnight, by leaving its lending rates unchanged, as the Bank of Canada did yesterday.
Last night, the Federal Reserve left US interest rates on hold, and warned that the “implications of developments in the Middle East for the US economy are uncertain”.
The agenda
7am GMT: UK labour market report
8.30am GMT: Swiss National Bank interest rate decision
8.30am GMT: Riksbank interest rate decision
Noon GMT: Bank of England rates decision
1.15pm GMT: European Central Bank interest rate decision
1.45m GMT: European Central Bank press conference
Updated
