UK consumer price inflation (CPI) rose to 3.3% year-on-year in March 2026, up from 3.0% in each of the two prior months, marking a three-month high and providing the first concrete evidence of the Iran war's impact on British consumer prices [1]. The increase was driven almost entirely by a sharp surge in fuel costs after the conflict, which began on February 28, brought Persian Gulf energy exports to a near standstill [1]. On a monthly basis, CPI rose 0.7% in March, compared with a rise of just 0.3% in the same month a year earlier [1]. The broader CPIH measure, which includes owner-occupiers’ housing costs, rose to 3.4% annually, up from 3.2% in February [1].
Key figures from the report include a 4.7% annual increase in transport costs, the fastest since December 2022, with motor fuels jumping 8.7% month-on-month—the largest gain since June 2022 [1]. Petrol averaged 140.2p per litre in March, the highest since August 2024, while diesel averaged 158.7p per litre, the highest since November 2023 [1]. Housing and household services inflation accelerated to 5.3% annually, up from 4.6% in February, driven by a surge in domestic heating oil [1]. Food and non-alcoholic beverages inflation rose to 3.7%, up from 3.3% in February, and services inflation edged up to 4.5% from 4.3% [1]. In contrast, clothing and footwear prices fell 0.8% year-on-year, the steepest decline since March 2021, and core CPI (excluding energy, food, alcohol, and tobacco) dipped slightly to 3.1%, the lowest since September 2021 [1].
The report notes that before the war, inflation had been trending toward the Bank of England’s 2% target and rate cuts were widely expected in 2026 [1]. However, the energy shock has shifted this outlook, with gas and electricity prices set to rise in July and food producers signaling further pass-through of costs [1]. As a result, the Bank of England’s Monetary Policy Committee is expected to hold rates at 3.75% on April 30 while assessing the extent of the shock's spillover into wages and broader prices [1].
CONCLUSION
The sharp rise in UK inflation to 3.3% in March 2026, primarily driven by surging fuel costs linked to the Iran war, has altered expectations for monetary policy easing. With further energy and food price pressures anticipated, the Bank of England is now expected to maintain its current interest rate stance as it monitors the broader impact on the economy.