The latest UK inflation figures already look dated, capturing a February backdrop that has since been overtaken by a sharp deterioration in the global energy outlook.
While the data suggested price growth was easing and broadly moving in line with expectations, the escalation of conflict in the Middle East has materially altered the inflation picture, driving a renewed rise in oil and gas prices. That shift is especially significant because it comes at a time when domestic inflation pressures were already proving stubborn, with services inflation, wage growth and factory input costs all showing resilience.
The result is a markedly less benign outlook for the Bank of England, which now faces the growing risk that inflation remains above target for longer and that tighter policy may yet be required.
Industry experts are reacting to the latest data below:
Daniel Casali, Chief Investment Strategist at wealth management firm Evelyn Partners, comments:
‘This the inflation reading for February is already an outdated snapshot of UK price dynamics, given that it predates a sharp rise in global energy prices triggered by the escalation of conflict in the Middle East at the end of last month. Since then, wholesale natural gas prices have surged by more than 70%, the Brent crude oil benchmark has risen by 36%, and unleaded petrol at the pump has increased by nearly 7%.
‘What we do learn today is that this mounting external pressure on inflation in the coming months is coming on the back of domestic inflation pressures that were already firming before that oil shock hit.
‘Service sector inflation had been running at elevated levels, supported by resilient wage growth and rising input costs. Forward‑looking services producer price indicators suggest that service‑sector inflation may accelerate further, especially as energy‑driven pressures feed into broader price‑setting behaviour. In the manufacturing sector, prices are also rising. The March Purchasing Managers’ Index for manufacturing input prices recorded its largest monthly jump since 1992.
‘Financial markets have reacted swiftly and traders have moved to price in nearly three separate quarter‑point Bank of England (BoE) rate hikes, reflecting expectations that headline CPI will remain above the 2% target for longer as energy‑related inflation becomes more entrenched.
‘The Bank’s 19 March Monetary Policy Committee (MPC) communication acknowledges that monetary policy cannot offset global energy shocks. However, it also highlighted heightened concern over domestic second‑round effects and the risk that sustained higher energy prices could entrench broader inflationary pressures. The statement concluded by noting that the MPC “stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term” – indicating a clear leaning toward further tightening. This represents a notable shift away from the Bank’s earlier easing bias.
‘The BoE will also be concerned that inflation expectations become unanchored. In March, the latest Citi/YouGov survey showed inflation expectations for the next 12 months rising sharply to 5.4% from 3.3%, reaching their highest level since March 2023 and reversing much of the disinflationary progress seen in previous months.
‘With geopolitical shocks and strengthening domestic cost pressures, the inflation trajectory appears increasingly less benign. Rising interest rate expectations have already placed upward pressure on gilt yields. The 2‑year gilt is trading at 4.6%, its highest level in nearly two years, and could well go higher.’
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said;
“Today’s inflation report is little more than a relic of the world before the Iran conflict. While the February report was broadly in line with expectations, and confirms that inflation was on a path back to 2%, the outlook for inflation has radically changed. Yesterday’s PMIs offered the first sign of how much the energy price shock is changing the inflation outlook, and this will start to show up in next month’s data, before building later this year when the energy price cap moves higher. Clearly the Bank of England is worried about inflation. And while the underlying weakness of the economy means rate cuts would be painful, policymakers may decide they do not have the luxury of “looking through” higher inflation, especially if the conflict does last longer than the market currently seems to be hoping.”
Lindsay James, investment strategist at Quilter:
“Today’s inflation reading of 3% on the headline measure and 3.2% on the core gauge needs to be read with caution. It captures February, so it predates the escalation in the Middle East at the very end of the month. Markets have already priced in that shift, which means this release is effectively looking in the rear‑view mirror.
“Oil sat around $70 throughout February but has traded above $90 for most of March. European gas prices are roughly 60% higher than their February levels. Businesses are already feeling the squeeze even if households are still shielded by the lagged effect of the energy price cap. Normally the Bank of England looks through energy volatility, but the severity of the current shock has forced policymakers to signal they are ready to act if necessary. Hopes of rate cuts this year have largely evaporated, and several hikes can no longer be ruled out.
“That is why today’s CPI print is old news. It shows an economy where inflation appeared to be stabilising and was expected to drift towards 2.1% in Q2, helped by earlier gas price declines and supportive energy policy. But that benign path has already been overtaken by what has been described by the IEA as the “greatest global energy security threat in history”. For that reason, February is likely to represent the low point for UK inflation for some time.
“The real question now is how persistent this new inflationary pulse becomes. In the short term the impact may be contained. But if elevated energy prices hold, they will flow through the EPC mechanism from July and risk setting off second‑round effects across goods, services and higher wage demands. In 2022, when labour was in short supply and before the dawn of the AI era, these demands were in many cases met. However in 2026 the balance of power has changed, with employers rather than employees holding the cards.”
Emma Wall, Chief Investment Strategist, Hargreaves Lansdown:
“As expected by the market, inflation held steady in February. Today’s print is not the influential one it usually is for bond and equity pricing. Instead, the Iran war, oil prices and where inflation may go from here dominates. Gilt yields, having hit highs earlier in the week, last seen in the global financial crisis, have tempered on the hope of resolution. We think the conflict is likely to impact next month’s data, but it will be transient, and therefore unlikely to force Bank of England policy. We don’t think the next interest rate decision is a hike, rather a pause before returning to the cutting cycle.”
Mike Ambery, Retirement Savings Director at Standard Life plc said:
“Today’s inflation figure of 3% suggests that price pressures had been stabilising, with CPI holding broadly steady over the last few months. This reflects a period where lower fuel costs and easing services inflation were helping to bring the headline rate closer towards the Bank of England’s target. However, the outlook has become considerably more uncertain in recent weeks.
“The escalation of conflict in the Middle East and the resulting sharp rise in wholesale oil and gas prices have the potential to push inflation higher again as we move through the year, and expected increases in the energy price cap from July and October could become key pressure points. However the impact is unlikely to be limited to energy alone with wider cost pressures – from food to technology supply chains – also likely to feed through. As a result, markets have already begun to reassess the path for interest rates, with expectations shifting noticeably in recent weeks. While today’s data does not yet capture these changes, policymakers are increasingly focused on what comes next rather than what has just passed. As the Bank of England signalled in its recent decision to hold rates at 3.75%, the path back to target is unlikely to be smooth, and policy is likely to remain cautious as these pressures play out.
“For households and those planning for retirement, this creates a more complex picture. Even with inflation appearing relatively stable for now, the risk of further price rises reinforces the importance of staying engaged with financial planning. For savers, it’s worth remembering that cash rarely keeps pace with inflation over the long term. A balanced approach – maintaining accessible savings for short-term needs while taking a longer-term view to protecting purchasing power – can help people stay on track, and focusing on what can be controlled rather than reacting to short-term movements is often the most effective way to navigate periods of uncertainty.”
Charlie Ambler, Co-Chief Investment Officer, Partner at wealth management firm Saltus, said:
“While we expected February’s inflation data to remain stable around 3%, increasing oil prices are widely expected to push up the headline rate of inflation to near double the 2% target later this year, threatening the Bank’s slow and steady rate cutting cycle and frustrating markets. Should this materialise, markets are unlikely to respond well.
“While the Bank of England has signalled a cautious and data dependent approach to monetary policy, resulting in a hold at 3.75% last week, financial markets have already reacted sharply to the changing global outlook. Investors are now pricing in the possibility of multiple interest rate increases this year, with some expectations pointing to as many as four rises before the end of 2026. The gap between market expectations and the Bank’s own guidance highlights just how uncertain the inflation outlook has become.”
“Amid this backdrop, policy remains finely balanced. While the Bank remains committed to responding to incoming data, the risk of renewed inflationary pressure later in 2026 remains firmly front of mind for investors. Much will depend on the trajectory of energy prices and how long geopolitical tension persist.
“After a period of relative calm and strong performance across risk assets in early 2026, investors are now focused on the economic and financial implications of rising geopolitical tension. The key message, therefore, remains one of discipline. As geopolitics continues to shape asset allocation decisions, investors must not lose their focus on quality and resilience, delivered by a balanced approach to portfolio construction.”
Emma Hollingworth, Chief Distribution Officer at LSL Financial Services, has commented:
“A flat inflation reading keeps the Bank of England firmly in cautious territory. With ongoing geopolitical tensions still feeding through to energy and shipping costs, policymakers will want clearer evidence that domestic price pressures are easing before committing to the next rate cut.
“Despite the lack of movement today, the backdrop for mortgage pricing has changed materially. Swap rates have been rising, reflecting market concerns about the durability of inflation. That means fixed‑rate mortgages are unlikely to fall meaningfully in the short term, even as lenders continue to compete hard for business.
“For brokers, this reinforces the importance of early engagement. With a large cohort of borrowers approaching the end of their fixed terms in 2026, advisers have a timely opportunity to guide clients through a market shaped by global uncertainty and rising funding costs.”
Susannah Streeter, chief investment strategist, Wealth Club
“February’s inflation snapshot shows the calm before the storm of higher prices. Before the war with Iran broke out, causing destruction and chaos to energy facilities and supply routes, these numbers demonstrate that the price spiral had paused, with the headline rate of inflation staying at 3%.
Prices at the pumps had fallen back, easing the pressure on motorists and giving consumers a bit more to spend. Clothing, footwear, furniture and household goods rose slightly in price.
What a difference a month makes. Even though oil has retreated from the frighteningly high levels hit over the past few weeks, Brent crude is still hanging stubbornly around $100 a barrel, and gas prices remain highly elevated.
Higher energy prices risk being passed on by companies to consumers, and that will be the big worry going forward. Already, core CPI, stripping out volatile energy and food prices, rose slightly from 3.1% to 3.2% in February, indicating that underlying price pressures remain. These are set to intensify, given that energy and freight costs are mounting and firms are likely to want to pass on these extra costs.
President Trump is teasing the world, claiming negotiations are showing significant progress, with a 15-point plan aimed at an initial month-long ceasefire apparently on the table. But conflict is still raging and will be highly complex to solve.
While the key Strait of Hormuz is being opened to ‘non-hostile’ vessels, there will be no safe passage for ships flagged as allies of the US. Right now, given how wide Iran’s circle of enmity appears to be, the Strait will be a highly difficult route to navigate, and production is likely to remain depressed in Gulf states, which are struggling to store crude built up with nowhere to go.”
Michael Metcalfe, Head of Macro Strategy at State Street Markets, reacts:
“Inflation matched forecasts in February, but interest rates and the Bank of England have already moved on. State Street PriceStats data already shows UK retail fuel prices up more than 10% in the first twenty-three days of March. This marks a rate of pass through into retail fuel prices close to double what we observed in the immediate aftermath of Russia’s invasion of Ukraine in 2022. It underlies the dramatic shift in the outlook for headline inflation and, potentially, interest rates already underway.”
Zara Nokes, Global Market Analyst at J.P. Morgan Asset Management (JPMAM) says:
“For the Bank of England, today’s inflation data is in effect old news, with attention now firmly on what is coming down the tracks as a result of the conflict in the Middle East. Nonetheless, the upside surprise in core inflation today will be of concern for the Bank given it shows we are still contending with sticky price pressures even before accounting for the recent spike in energy prices.
The energy shock will certainly put upward pressure on inflation over the next couple of quarters, but we are very unlikely to see an inflation spike in the same magnitude as 2022. We are in a very different world; the labour market is in a much weaker position, and this therefore makes it far less likely that workers – concerned about rising costs – feel able to push for higher wages and thus entrench price pressures more broadly. In my view, therefore, the Bank of England should not need to be hiking rates this year, and staying on hold for an extended period of time should be sufficient to anchor inflation expectations without compounding growth weakness.”
Derrick Dunne, CEO of YOU Asset Management, has commented on this morning’s inflation data from the ONS:
“These latest data from the ONS are possibly the most unhelpful in recent history and we all know the reason why. They capture the precise point in time before which the conflagration in the Middle East began and do nothing to help us understand the pressure households will now be facing as prices skyrocket at forecourts across the UK.
“Further, because of the intricacies of the energy price cap we won’t know the true extent of the damage to the economy for some time – nor will headline inflation reflect the problem properly until the Summer at least.
“What is clear though is rates are not going to fall until we know more. There are now some indications the crisis might be entering a negotiated end game – but that is by no means guaranteed.
“Ultimately the Bank of England has a job to balance its mandate to control inflation against economic problems such as employment and GDP which are not its primary role. There is a rising chorus calling for rate setters to look through the coming energy price shock.
“This is because the shock is outside of its control, households are already under pressure on day-to-day spending and excess savings have been whittled down by the past few years. To hike into this would guarantee an economic downturn simply because the economy cannot tolerate the level of rate we’re at, no matter what external energy prices are doing.
“Anyone unsure what this could mean for their long-term financial plans should consider consulting with a financial planner.”
Richard Pike, sales and marketing director at servicing software provider Phoebus, in reaction:
“While February’s inflation rate remained unchanged at 3%, the reality is that these numbers are already overshadowed by the economic shockwaves triggered by the recent conflict in Iran. The resulting surge in global energy and commodity prices is going to create pressures for households and lenders in the months ahead, but with no clear end to the war, the extent of that pressure is unclear right now.
“The industry must prepare for continued volatility. Lenders will need agile systems and real‑time data capabilities to respond quickly to changing conditions and to support borrowers through what is likely to be a more turbulent period. The focus now should be on resilience, adaptability, and ensuring the market is equipped to navigate whatever comes next. An experienced servicing provider like Phoebus Software can help achieve this for clients.”
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown:
“Inflation remained steady this month, but current geopolitical instability means we will likely see it start to rise in the coming months. This will have an impact on everyone, including pensioners, who need to make sure that their pension income is robust enough to see them through inflationary ups and downs.
Retirees on the lookout for a guaranteed income will find annuities continue to offer good value. The latest data from HL’s annuity search engine shows a 65-year-old with £100,000 pension can get up to £7,644 per year from a single life level annuity, with a five-year guarantee. This can act as a solid basis for retirement income alongside the state pension, but it’s important to say that level annuity incomes don’t change over time and what might be a good income now may look sorely stretched during a time of high inflation. Inflation-linked products are available – one that rises by 3% per year can give a starting income of up to £5,781 per year. This is demonstrably lower than a level product, and you do need to consider how long it will take the income to catch up to that of a level product.
Income drawdown can play a huge role in helping retirees manage inflation long term. By remaining in the markets, it gives their investments time to grow further, though it’s important to say markets can also be volatile. A flexible approach is important to make sure you aren’t taking too much out and potentially depleting capital. Mixing and matching annuities and drawdown could be a great option. You can secure a level of guaranteed income with an annuity and then keep some flexibility when drawing an income from drawdown. You can then consider annuitising in stages, potentially securing higher incomes as you age.”
Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk, said:
“The outlook for interest rates has changed drastically over the past few weeks, spurred by unstable swap rates caused by the conflict in the Middle East. As a result, the mortgage market has been extremely volatile and over 1,700 products have been withdrawn since 9 March. While some of these deals have come back, they are at higher rates and it could be fair to assume many lenders may be taking this path, which could drive average rates up further. Currently, lenders are expecting several base rate hikes, which may be demoralising for borrowers. Even just one 0.25% hike could push mortgage rates higher, but borrowers on trackers will quickly feel the force of these rises. Currently the average two-year tracker is 4.55% and a small jump could take this to around 4.80%, adding almost £430 a year onto their loan.
“Around 1.8 million borrowers are expected to refinance this year; this includes those coming off low five-year fixed rates. Homeowners should prepare themselves for higher-than-expected costs, if they lock into another five-year term, they could see their monthly repayments spike by over £380. Borrowers have the option of securing a new deal typically up to six months before their current rate expires, this may be crucial for those who are concerned about rising costs. This also avoids borrowers slipping onto their revert rate, which would add over £630 per month on average, an amount that many may not be able to afford.”
Rob Morgan, Chief Investment Analyst at Charles Stanley, part of Raymond James Wealth Management, comments:
“Today’s inflation figures offered little surprise. Headline CPI held at 3% in February and, although core inflation edged up slightly to 3.2%, the overall picture would normally have been consistent with a continued path towards 2% in the months ahead. In that world, the Bank of England would have had a clear runway for interest rate cuts, especially with a weakening labour market set to weigh on demand.
“But this dataset already belongs in the rear‑view mirror. The escalation in the Middle East has upended what looked like a reassuring disinflation story, and UK households and businesses now face the beginning of a renewed inflationary tide as oil and gas prices spike.
“Before the conflict, UK inflation was expected to fall to 2% within a year. Growth was subdued, and the labour market was showing signs of cooling. Since then, Brent crude has surged around 40% and natural gas prices more than 75%, dramatically shifting the outlook.
The most immediate pressure is visible at the petrol pump and in business energy costs. But from July onwards, households are also likely to feel the impact through higher energy bills. As a large net importer of energy, the UK is acutely exposed to global wholesale price rises.
“The pain doesn’t stop with fuel, heating and power. Even firms that don’t directly use oil or gas face rising costs through energy‑intensive supply chains and freight. Food prices, which are sensitive to transport and fertiliser costs, also risk another push higher. This creates a potential second‑round effect on inflation as businesses attempt to recover squeezed margins.
“Forecasts have therefore been hastily rewritten. Instead of drifting back to the Bank of England’s 2% target, inflation could now head towards 4% by year‑end – but it’s an outcome that hinges almost entirely on how long the conflict disrupts flows through the Strait of Hormuz.”
Chris Beauchamp, Chief Market Analyst at IG:
“Today’s inflation data from the UK, like that from the US, comes from a different time, before Donald Trump decided to upend the global economy and spur a new wave of inflation. If the conflict isn’t resolved quickly, and oil prices keep rising, we may look back at early 2026 as a halcyon period of low price growth. Andrew Bailey will definitely feel wistful about an era when he could look forward to cutting rates rather than thinking about having to increase them.”
Kevin Brown, savings specialist and Scottish Friendly, has commented:
“Reading February’s inflation data from the ONS feels like giving the rear-view mirror a cursory glance just as the road ahead takes an unexpected turn.
“Today’s figures show inflation holding steady, maintaining what had been a reassuring drift down towards the Bank of England’s 2% target.
“For households and policymakers alike, this snapshot still largely reflects a world before the recent escalation in the Middle East. The more consequential data will come with March’s release, which may begin to show how rising oil and energy prices are feeding through to UK consumers.
“What today’s data does highlight is how the winds of change can still hinder the trajectory towards the Bank’s target, even before the latest shock. With inflation now likely to move higher in the near term, expectations for further base rate increases will only strengthen.
“Higher rates may offer some support to savers, but rising prices continue to chip away at the real value of cash over time. In a more uncertain and potentially volatile environment, it becomes increasingly important to think carefully about how savings are positioned.
“For some, that may mean considering investments alongside cash savings as part of a longer-term approach, helping to maintain purchasing power over time.”
Charlotte Kennedy, Chartered Financial Planner at Rathbones, says:
“The conflict in Iran, and the resulting surge in energy prices, means the latest inflation figures are already out of date when it comes to where prices are heading next.
“The latest reading shows that slower rises in petrol and diesel prices had been helping to keep inflation in check. But that trend has now gone into reverse. Rising tensions in the Middle East are driving up oil prices, and that’s beginning to feed through to forecourts. If sustained, the impact won’t stop there. Oil is a key input across the economy, so higher prices could ripple through supply chains – pushing up the cost of producing and transporting goods, including everyday essentials like food.
“It’s also important to remember that when inflation holds steady, it doesn’t mean prices aren’t rising, it simply means they’re increasing at the same rate as before. And with inflation expected to tick up in the near term, while interest rate cuts remain on hold, households may need to stay on the front foot. That could mean revisiting budgets, prioritising essential spending, and checking that savings plans remain resilient in the face of persistent cost pressures.”
Tim Grimsditch, Managing Director at Unbiased, said:
“Inflation remained at 3% in February, suggesting that price pressures are easing from recent highs, although they have yet to return fully to target.
“However, the recent conflict in the Middle East and rising global energy costs mean there is a real risk that inflation could climb again in the months ahead. With fuel prices already increasing, the downward trend may prove short-lived.
“If you are unsure how these changes could affect your finances, it is worth speaking to a professional financial adviser who can help you plan with confidence.”
Ben Thompson, Director of Home Moving Strategy, Mortgage Advice Bureau:
“In so many ways today’s inflation numbers feel irrelevant and outdated given what’s been going on for the last few weeks. What we do know is the outlook for inflation becomes very gloomy with every hour of this conflict that passes without resolution or any degree of certainty.
“We also know that UK economic growth was continuing its struggle before the conflict started, and maybe that calls into question the much anticipated and covered three or four rate rises due now this year, as opposed to the two or so falls that had been expected. Inflation must not be allowed to creep back in.
“However, a stalling and even falling economy is very negative also, and so maybe we won’t see rates rise as much this year as some are predicting, and in fact we could see them hold for a while until the outlook becomes much clearer. That would feel sensible, but it’s a very fine balance indeed.
“For those moving home, it remains a buyers’ market with lots of property choice across much of the UK, and so is a good time to make the leap. Those refinancing can still find good mortgage deals. But, for anyone looking at either moving or refinancing, do speak with a mortgage adviser who will be able to access a wide choice of lenders and products to make sure you can achieve what you want to.”
