UK Inflation Climbs to 3.5% as Fuel Prices Surge

Rising fuel costs pushed the United Kingdom's annual inflation rate to 3.5% in September, exceeding economists' expectations as disruptions to global energy supplies linked to the Iran conflict drove up transportation expenses. The Office for National Statistics (ONS) reported the increase on October 21, 2026, with diesel prices surpassing £2 per liter during the month.

The Consumer Prices Index (CPI) climbed from 3.1% in August to 3.5% in September, according to the ONS. Economists had forecast a smaller increase to 3.4%, while motor fuel inflation reached its highest level since August 2022.

Transport costs made the largest upward contribution to the overall inflation rate, the ONS said. Restaurants and hotels provided the biggest downward contribution, partially offsetting the pressure from higher fuel prices.

Core CPI, which excludes energy, food, alcohol, and tobacco, increased by 2.8% in the 12 months to September, compared with 2.6% in August. The figures indicate that underlying inflation also accelerated over the period.

Petrol prices rose above £1.70 per liter, while diesel exceeded £2 per liter this month, according to The Guardian's reporting. The increases followed a sharp rise in oil and gas prices after the United States and Israel launched their war against Iran at the end of February.

The conflict has disrupted shipping through the Strait of Hormuz, a critical route for global fossil fuel supplies. The BBC reported that Iranian threats against shipping through the strait increased oil transportation expenses, including maritime insurance costs, while Brent crude rose well above $100 per barrel, according to The Guardian.

The higher inflation reading comes as the Bank of England faces renewed pressure over monetary policy. Officials are widely expected to raise interest rates at their next meeting in November, while concerns have grown that inflation could exceed 4% next year. The central bank's inflation target is 2%.

Separately, the UK government approved development of the Jackdaw gasfield in the North Sea, allowing the project to move toward production under regulatory consent. Energy Secretary Miatta Fahnbulleh said the field was expected to begin supplying gas to homes and businesses from this winter.

Fahnbulleh said the decision followed consideration of the relevant factors and argued that domestic production would strengthen energy security, support skilled North Sea workers, and reduce reliance on imported fuels with higher emissions. She also maintained that the project was compatible with the UK's legally binding climate commitments and its target of reaching net zero by 2050.

The approval has drawn opposition from environmental campaigners and some Labour MPs. Although Labour's 2024 election manifesto committed to ending new North Sea drilling licenses, the Jackdaw and Rosebank projects involve applications for environmental approval under existing licenses.

Prime Minister Andy Burnham defended the Jackdaw decision, saying it would protect hundreds of jobs and help keep millions of homes warm during winter. He also cited the government's plans to establish an Energy Wealth Fund with an initial £2 billion investment to direct oil and gas revenues toward the transition to cleaner energy and support longer-term reductions in energy bills.

The government said the fund would support renewable energy and the broader green transition while maintaining domestic energy supplies. The separate decision concerning the Rosebank oilfield project remains under consideration.