INFLATION TO RISE IN IRAN WAR 'SHOCK'

BRITAIN risks a surge in inflation as the Iran war sends oil and gas prices skyhigh, experts warn.

- BY GILES SHELDRICK

It comes as the Bank of England stands ready to ramp up interest rates amid the cost-of-living squeeze.

Governor Andrew Bailey said yesterday: "War in the Middle East has pushed up global energy prices.

"You can already see that at the petrol pumps and, if it lasts, it will feed into higher household energy bills."

Bank chiefs held interest rates at 3.75% - but warned inflation forecasts may lead to bigger price rises than expected.

The inflation rate - measured by the Consumer Prices Index - is currently at 3% but there are fears it could hit 4% this year, increasing pressure on hard-up households.

Defence Secretary John Healey confirmed the UK is ready to "step up" its defensive support for Gulf states after Tehran attacked energy facilities across the region. Oil prices surged to $119 a barrel yesterday before retreating to $113.

Sir Keir Starmer and the leaders of France, Germany, Italy, the Netherlands and Japan condemned Iran's attacks on ships, oil and gas sites plus its "closure" of the Strait of Hormuz shipping route.

They added in a statement: "We call on Iran to cease immediately its threats, laying of mines, drone and missile attacks." The leaders also expressed their "readiness to contribute to appropriate efforts" to reopen the key Gulf passage and take "other steps to stabilise energy markets".

The war has spooked the mortgage market, sparked claims of profiteering at forecourts and may see millions of squeezed households facing energy bills up to £300 higher for at least the next year as their spending power drops. Some observers fear watchdog Ofgem's annualised price cap, which sets the maximum unit price of gas and electricity, may top £1,900 over autumn and winter.

From April 1 to June 30 the limit for a typical dual-fuel household paying by direct debit is £1,641.

Higher wholesale costs, leading to dearer fuel, are derailing bids to cut inflation to the 2% target.