Escalating tensions in the Middle East continue to influence global markets, particularly energy prices and shipping costs. For UK businesses, the economic ripple effects are likely to be felt across fuel costs, logistics, inflationary pressures, and borrowing conditions over the coming months.
Global oil benchmarks reacted quickly to the conflict, with traders pricing in risks to supply routes, particularly around the Strait of Hormuz, the strategic shipping channel that handles roughly one-fifth of the world’s oil supply. Any disruption or perceived risk increases volatility in crude prices, which directly affects UK fuel costs, transport expenses, and production overheads.
UK companies with logistics exposure, including construction, manufacturing, and distribution, are particularly vulnerable. Increased fuel prices quickly translate into higher delivery costs, which compress margins unless passed on to customers. However, many businesses may hesitate before increasing prices while demand remains fragile, and instead, absorb these costs.
This volatility also feeds into inflation expectations. If energy prices remain elevated, the Bank of England may delay interest rate cuts expected later in 2026. Higher-for-longer borrowing costs would affect SMEs seeking finance for investment or working capital. Businesses planning capital expenditure should therefore stress-test funding scenarios against both falling and rising interest rates.
Insurance premiums are another indirect effect. Shipping insurers often increase premiums when geopolitical risks rise, with these costs filtering down through supply chains. UK importers sourcing goods from Asia may experience longer lead times and increased freight charges, even if they do not trade directly with the Middle East.
Currency movements are also worth monitoring. Political instability tends to strengthen the US dollar, which makes imports priced in dollars more expensive for UK companies. This includes raw materials, technology hardware, and commodities.
What should businesses do now?
- Review fuel and logistics costs in budgets
- Consider fixed-price contracts with suppliers where feasible
- Evaluate cash flow buffers to absorb cost fluctuations
- Review pricing strategies and customer communication plans
- Assess exposure to overseas suppliers and diversify where possible
Accountants can play a key role in modelling multiple scenarios — including oil price spikes and interest rate delays — ensuring businesses remain financially resilient.
While the situation remains fluid, the next 60 days will likely determine whether volatility stabilises or escalates further. Businesses that proactively plan for higher costs and supply chain disruption will be better positioned to manage uncertainty.
Book a cash-flow stress test to assess your exposure to rising fuel and logistics costs.