UK motorists face a staggering £1 billion in additional fuel costs from the Iran conflict, with spending surpassing £920 million last night and projected to hit the milestone today amid Easter travel surges.
Pump prices climbed further yesterday, pushing average diesel rates to 190.62 pence per litre—within 9 pence of the 2022 record of 199.09 pence—while petrol reached 157.71 pence per litre. Since the conflict began on February 28, diesel prices have risen 34% from 142.38 pence, and petrol 19% from 132.83 pence. Filling a typical 55-litre family car tank now costs nearly £14 more for petrol and £27 more for diesel.
Oil Price Drop Offers Relief
Global oil prices plunged 13% below $100 per barrel to $94.80 (£70.73) following a temporary US-Iran ceasefire agreement. Experts predict that if the truce holds and the Strait of Hormuz remains open, pump prices could fall by about 8 pence per litre—saving roughly £4.50 per fill-up—within weeks.
US President Donald Trump agreed to suspend planned strikes on Iran for two weeks, with Tehran pledging to lift its Strait blockade to resume oil flows during peace negotiations. Commercial shipping through the Strait has dropped 95% since February 28, tightening supplies and driving up costs. However, oil price changes typically take weeks to reach pumps.
VAT Windfall and Fuel Duty Debate
The crisis has generated nearly £170 million in extra VAT revenue for Chancellor Rachel Reeves in just over a month from elevated pump prices. Critics urge delaying the planned 5 pence per litre fuel duty increase set for September 1, which would add £3 to a typical fill-up.
Rachel Reeves and Prime Minister Sir Keir Starmer intend to proceed despite pressure to cut taxes like other nations amid the energy squeeze. Analysis of daily consumption and price data shows diesel drivers have paid £676 million more since February 28.
Expert Warnings on Lingering Pain
Steve Gooding, director of the RAC Foundation, stated: ‘Whether or not we are on the cusp of meaningful and hopefully long-lasting peace, drivers continue to pay a huge “war premium” at the pumps, and the Exchequer continues to receive tens of millions of pounds from drivers in a VAT windfall it wasn’t expecting.’
He added: ‘Even if the price of oil begins a sustained drop, it has got a long way to go before reaching the $70 a barrel mark which is where we were just before the conflict started. That means drivers will continue to feel financial pain on the forecourts probably for weeks to come.’
Edmund King, AA president, noted: ‘The conflict has been painful for drivers and hauliers. With the ceasefire now in place, it is hoped fuel prices could fall by around 8p per litre over the coming weeks. However, consumers need an extended period of support following the hike in pump prices. The planned rise of fuel duty starting on 1 September should be delayed to help ease pressure on household budgets.’
Gordon Balmer, head of the Petrol Retailers Association, which represents 4,500 forecourts, said: ‘Falling oil prices are welcome news for motorists and if this trend continues it should be reflected in lower pump prices. However, it is to be noted that this is a temporary ceasefire and the market remains volatile.’
Opposition Calls for Reversal
Tory shadow transport secretary Richard Holden criticized the duty hike: ‘Labour’s fuel duty hike comes at the worst possible time for families already struggling under the weight of this Government’s tax hikes. Britain has been left exposed to the energy crisis by Labour’s Net Zero zealotry and drivers are already in the firing line. Labour should listen to the country and back thought-through Conservative plans to bin the hike.’
Tory shadow transport minister Greg Smith added: ‘Cars are essential to millions of Brits. Labour’s political choice to hike fuel duty this September is a massive kick in the teeth for so many, not least when other countries are cutting fuel duty amid the crisis. This chancellor and PM need to get a grip, understand the real world, and scrap their fuel duty hikes.’
