Politics Weekly UK Is the UK government prepared for oil price hikes?
Mar 9, 2026
They discuss how Middle East conflict has pushed oil above $100 and sent markets into turmoil. They talk about mortgage and borrowing cost risks as gilt yields and Bank rate expectations shift. They consider government choices to shield households from rising energy bills. They explore political fallout, UK–US relations and how market pressure can reshape policy.
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Oil Spike Driven By Middle East Strikes
- Oil prices jumped above $100 a barrel and hit their biggest daily rise since early COVID, driven by strikes on Iranian energy sites and production cuts in Kuwait and Iraq.
- The G7 talk of releasing strategic reserves briefly eased prices, but markets remain volatile with knock-on effects on stocks and gilts.
Higher Gilts Are Shrinking Fiscal Headroom
- Rising gilt yields have increased government borrowing costs, eating into Rachel Reeves' fiscal headroom created at the budget.
- That means less fiscal capacity to fund public services if the spike persists and borrowing stays high.
Prepare For Delayed Mortgage Rate Cuts
- Expect mortgage-rate cuts the market priced for in early 2026 to be delayed; rates may flatline rather than fall from 3.75% soon.
- Prepare for mortgage reviews to keep higher payments as lenders likely won't pass on cuts.