Inflation in the United Kingdom climbed to its highest level in almost a year, official figures showed on Wednesday, October 21, 2026, as the Iran war continued to push fuel prices higher. According to the Office for National Statistics, consumer prices rose 3.5% in the 12 months to September, up from 3.1% in August. The reading was the strongest since October last year and came in above the 3.4% that most economists had predicted, moving inflation even further beyond the Bank of England’s 2% target.

Fuel and transport lead the rise

Transport was the biggest contributor to the increase, and the effect was most visible at the petrol pump. Motor fuel prices were up 30% compared with a year earlier, accelerating from a 23% annual rise in August. The pressure stems from the war involving Iran and the resulting bottlenecks in the Strait of Hormuz, which have tightened global oil and gas supplies. For households, this means higher costs every time they fill the tank. For businesses, it means higher delivery and operating expenses that can eventually show up in shop prices.

Markets expect a rate rise

The stronger-than-expected data reinforced market expectations that the Bank of England will raise interest rates at its next meeting on November 5. Most economists forecast an increase in the central bank’s main rate to 4%. Suren Thiru, chief economist at ICAEW, said the conditions for a November hike are falling firmly into place. For borrowers, a higher rate could mean more expensive mortgages and loans. Savers may benefit from better returns, while investors will watch how sterling and UK government bonds respond.

Government promises some relief

Treasury chief John Healey said his budget statement, due the following week, would aim to give households and businesses some breathing space from rising living costs. Specific measures had not been detailed at the time of the report. Economists often point out that government support and higher interest rates can pull in different directions: relief measures may support spending, while the central bank is trying to cool price growth.

A wider global pattern

The UK is not the only economy feeling the heat from energy costs. Brent crude was trading near $112 per barrel, while the Associated Press reported that Japan’s trade deficit reached a record $17.8 billion as the Iran war pushed up oil import prices. Countries that rely heavily on imported fuel are especially exposed, because higher energy bills raise both consumer prices and national import costs.

What to watch next

Several developments will shape the outlook in the coming weeks:

• The Bank of England decision on November 5, including how the central bank describes the inflation outlook
• The details of the UK budget, especially any measures aimed at fuel, energy or household costs
• Oil prices and Hormuz shipping, which remain the main driver of fuel inflation
• The next monthly inflation report, which will show whether the September jump was a peak or the start of a longer climb

For consumers and businesses alike, the message is clear: energy-driven inflation is still the dominant force, and higher borrowing costs may follow.

Disclaimer: This article is for information only and is not financial advice.