Recent developments in the Middle East have sent shockwaves through global energy markets. The region is home to many of the world’s largest oil producers and critical shipping routes, such as the Strait of Hormuz. As a result, any sign of instability in this area immediately raises concerns about the security of energy supplies and the potential for disruption.
To put the potential impact into perspective, a modest increase in fuel prices, at just 5 pence per litre, can have substantial consequences for UK businesses. For a typical commercial fleet of 25 vans, this could mean an extra £400 or more per month in fuel expenses. For larger fleets, the costs escalate even further, putting significant pressure on already tight operating margins.
For businesses worried about how they could be affected, the team at Right Fuel Card have offered their insight into why prices could change, what this means for UK businesses, and how they can prepare.
Why are oil prices moving now?
Crude oil is one of the most actively traded global commodities. Markets don’t wait for confirmed supply disruption; they price in risk.
Strategic trade routes are in focus
The Strait of Hormuz is one of the world’s most strategically important chokepoints for global energy supply. This narrow waterway, situated between Iran and the UAE, serves as the gateway between the Persian Gulf and the open ocean. Every day, about 20% of the world’s seaborne crude oil and a significant share of liquefied natural gas (LNG) flow through the strait.
Any disruption here has immediate global consequences. Tanker operators face both practical and financial risks: rerouting ships means longer journeys, significantly higher costs, and increased insurance premiums.
Geopolitical risk premiums have risen sharply
In early trading this week, Brent crude, the global oil benchmark that sets the price for most UK fuel, rose sharply. This marks a significant increase from recent weeks and highlights how quickly market sentiment can shift amid geopolitical uncertainty. The spike reflects concerns about potential supply disruptions in the Middle East, especially as the region supplies a large share of the world’s crude oil and controls critical maritime routes, such as the Strait of Hormuz.
Analysts warn that prices could surge even higher, potentially reaching $90 to $100 per barrel in the near term. Such price jumps would put additional pressure on fuel costs, inflation, and business operating expenses in the UK and globally. (Sources: Bloomberg, Financial Times, IEA)
What this means for UK businesses
In the short term, here’s how this situation could cascade into costs and operational impacts:
- Fuel price volatility
Whenever global crude oil prices rise, the impact is felt across the entire fuel supply chain.
Higher crude prices quickly filter through to wholesale fuel markets and, ultimately, to retail petrol and diesel pump prices.
There is usually a lag of about 10 to 14 days before movements in global crude prices are fully reflected at UK petrol stations. However, this lag can be shorter or longer depending on the speed of market changes, existing supplier contracts, and overall volatility.
- Inflationary pressure
Businesses that rely on transport, delivery, or energy-intensive production (such as manufacturing, food distribution, and retail) will see their operating costs rise. If these increased expenses can’t be passed on to customers, they squeeze profit margins. Even businesses with indirect exposure to fuel costs, such as those that rely on frequent deliveries or import goods, may face higher input and finished-product prices.
- Supply chain and overhead costs
When oil prices surge, so do the costs of moving goods by road, rail, sea, and air. Over time, this can feed into higher prices for everything from supermarket groceries to industrial parts. Businesses may also see increased costs for heating, electricity, and other utilities, particularly if these are indexed to energy markets. For large organisations, these compounded overheads can become a significant burden, affecting competitiveness and profitability.
- Planning and forecasting challenges
Volatility in oil and fuel prices adds significant complexity to business planning and budgeting.
Suppliers may revise pricing more frequently, making it harder for businesses to lock in predictable costs. In highly volatile periods, some businesses may see fuel costs swing by hundreds or even thousands of pounds in a short period, challenging cash flow management and potentially forcing last-minute adjustments to operations or pricing.
What UK Businesses Can Do Now
With global oil prices on edge and pump costs under pressure, UK businesses need a proactive, strategic approach to fuel cost management. Here are actionable steps organisations can take to protect their budgets and maintain operational resilience in volatile times:
- Lock in stable pricing where possible: Negotiate fixed-rate supply contracts or use weekly fixed-price fuel cards to reduce your exposure to daily price spikes..
- Use fuel cards for visibility and control: Many providers offer weekly fixed-pricing models, which insulate your business from the wildest daily swings and make it easier to spot outliers or misuse.
- Get granular with cost reporting: Track fuel spend by vehicle, driver, or department to identify patterns, inefficiencies, or unexpected spikes. Detailed reporting makes it easier to manage budgets, negotiate with suppliers, and respond quickly if costs begin to escalate unexpectedly.
- Promote fuel-efficient operations: Use fleet telematics to encourage drivers to use route-planning tools, consolidate journeys, avoid peak congestion, and reduce unnecessary idling.
- Build scenario plans into your budgeting: Don’t rely on a single forecast for fuel costs. Instead, budget for a range of plausible price levels, best case, base case, and worst case, so you’re prepared for sudden swings in the market.
- Monitor the wider energy market: Keep an eye on developments, OPEC announcements, and national energy policy updates. Being informed enables faster, more confident decision-making and allows you to communicate risk and plans clearly to stakeholders and teams.
- Explore alternative fuels and sustainability initiatives: Investigate the potential of hybrid or electric vehicles, biofuels, or other green initiatives to reduce your long-term exposure to oil price shocks.
By combining these approaches, pricing, control, efficiency, planning, and innovation, UK businesses can not only survive but thrive in periods of fuel price volatility. The key is to act early, stay informed, and be ready to adapt your strategy as market conditions evolve.
