Bank of England holds rates as Iran war sends oil prices to new highs

Published on 30/04/2026 - 13:21 GMT+2

The Bank of England has held interest rates at 3.75% as the war in Iran and Tehran's effective closure of the Strait of Hormuz send oil prices to their highest level in four years.

The decision on Thursday was widely expected, following the US Federal Reserve's move the day before to leave rates unchanged for the third consecutive meeting and a similar hold by Japan's central bank on Tuesday.

Brent crude, the international benchmark, briefly surged above $126 (€108) a barrel during Thursday's session — its highest since the aftermath of Russia's full-scale invasion of Ukraine — as traders bet the Strait of Hormuz will remain shut for the long term.

Around a fifth of the world's crude passes through the waterway in peacetime.

Before the war began on 28 February, financial markets had expected the Bank of England to cut rates as inflation looked set to fall back towards its 2% target in the spring.

The conflict has since upended those expectations, with oil and energy prices spiking sharply.

Energy costs have raced higher again over the past few days as uncertainty over the strait deepens. UK inflation climbed to 3.3% in March — a three-month high — driven by a sharp jump in pump prices since the war began.

The Monetary Policy Committee's nine members are expected to have voted largely to hold, with one or two possibly backing a quarter-point rise as a preemptive move against further inflation.

Economists say the committee may hint at increases to come if the Middle East conflict, where a fragile ceasefire is holding for now, continues to push prices higher.

Sandra Horsfield, an economist at Investec, said the "repercussions of the conflict are still keenly felt and uncertainty about how the situation could evolve also remains high".

More consequential than the rate decision itself may be the Bank's quarterly economic projections, published alongside it, and the press conference led by governor Andrew Bailey.

The forecasts, the first since the US and Israel launched strikes on Iran, are likely to raise inflation projections and lower growth estimates.

Chancellor Rachel Reeves, whose cost-of-living plans have been thrown off course by the Middle East crisis, has said she is ready to provide support to households and businesses when and if needed.