Oil Surges Back to $107 as Trump Vows to Bomb Iran 'Back to the Stone Ages' — Ceasefire Hopes Collapse in 24 Hours

Markets entered Tuesday hopeful. Oil dipped below $100. The FTSE rose 1.3%. Asia surged — Japan's Nikkei jumped 5.2%, South Korea's Kospi leapt 8.4%.

Trump's address reversed all of it. Brent crude surged to $107.60, West Texas Intermediate hit $106.50. The FTSE 100 opened down 0.68% this morning. Germany's DAX fell 1.5%, France's CAC 40 dropped 1.35%, Italy's FTSE Mib lost 1.2%.

The pattern is brutally familiar. Week three: ceasefire rumours, oil drops 12%. Week six: Houthis attack Israel, oil rebounds $15. Week eight: Trump extends Hormuz deadline. Week nine: oil briefly breaks below $100, then Iran fires missiles at a Qatari tanker. Now week ten opens with Trump promising escalation, not withdrawal.

Alberto Bellorin of InterCapital Energy called the move a "clear market reality check following the earlier optimism for an imminent ceasefire." Trump's speech lacked a "concrete timeline" for reopening the strait, and a return to normal now looks "months away rather than weeks." BP rose 3.5% and Shell gained 2.5% — the only winners when oil surges are energy companies. For context on the broader conflict, see our Iran developing story tracker.

The RAC confirmed this morning what drivers already knew: March saw the biggest monthly rise in UK petrol and diesel prices ever recorded.

• Petrol: up 20p per litre in March, now averaging 153.7p per litre as of 2 April
• Diesel: up 40p per litre — nearly double the previous record monthly rise — now averaging 184.2p per litre
• Cost per fill: a tank of diesel now costs £22 more than before the war; petrol £11 more

Analysts estimate every $10 increase in the oil price pushes pump prices up roughly 7p per litre, with a two-week lag. With Brent back at $107 this morning — up from Tuesday's brief dip below $100 — April prices will climb further before any relief arrives.

Prices remain below the summer 2022 peaks after Russia's invasion of Ukraine (petrol 191.5p, diesel 199p), but the trajectory is steeper this time. The official markets regulator is investigating price gouging accusations. The Food and Drink Federation's forecast of 9% food inflation by year-end relies partly on transport costs — every 10p rise in diesel feeds directly into food distribution. For more on how energy costs hit household budgets, see our savings hub.

This morning's gilt market erased yesterday's gains:

• 10-year gilt: 4.90%, up 7 basis points at the open
• 2-year gilt: 4.36%, up 6 basis points
• 30-year gilt: up 3 basis points, hovering near 5.61%

Money markets now fully price two quarter-point BoE rate rises by year-end to 4.25%+, reversing yesterday's brief flirtation with fewer hikes. The April 30 MPC meeting is near-certain to hold at 3.75%. But the BoE faces the same impossible choice: raise rates to fight oil-driven inflation and crush an economy the OECD already forecasts at 0.5% growth, or hold and watch inflation spiral.

The BoE's CFO panel survey shows business price inflation expectations rising to 3.7% from 3.4%, with 57% of firms reporting high or very high uncertainty. McBride, a major cleaning products manufacturer, is already implementing temporary price hikes to cover elevated input costs. This is the second-round effect that forces central bank action regardless of growth concerns. For investors tracking the gilt opportunity, see our gilts hub.

The Bank of England's Financial Policy Committee confirmed yesterday that 5.2 million UK households — 58% of all borrowers — face higher mortgage payments by end of 2028. That's 1.3 million more than the 3.9 million projected before the war.

Average two-year fixed rates hit 5.84% — up a full percentage point in four weeks. Five-year fixes average 5.75%. Mortgage availability fell by 1,283 products — 17% of the market — in a single month. Remortgagers are worst hit, with some facing repayment increases of £417-444 per month.

On a £250,000 repayment mortgage over 25 years, the move from 4.83% to 5.84% adds £155 per month — £1,860 per year. Berkeley Group has stopped buying land and frozen hiring. Shares plunged 18%. Barratt Redrow fell 3.8% this morning.

Yesterday's advice to "wait 48 hours for Trump's announcement" has its answer: he escalated. The five-year fix at 5.75% now looks like the pragmatic choice — most offers are valid for six months, so you can renegotiate if a genuine ceasefire materialises. Waiting for a ceasefire dividend that keeps not arriving is a losing strategy. Use our mortgage calculator to model scenarios. For first-time buyers, see our mortgage guide.

Use your ISA allowance. Four days remain. The £20,000 limit resets on April 6 and cannot be carried forward. A cash ISA at 4.5% won't beat inflation, but tax-free negative returns beat taxable negative returns. Our ISA guide covers the full decision.

Lock the five-year fix. Trump's speech removed the case for waiting. At 5.75% average, it's not cheap — but 6%+ is coming if the conflict drags on. Most offers hold for six months. Lock now, renegotiate later if circumstances change. See our mortgages hub.

Marriage allowance backdate. Worth up to £1,260 over four years. Apply before April 5 to claim the full amount.

Pension contributions. Unused allowance from 2022/23 expires on April 5 — last year to carry it forward. The gov.uk annual allowance page explains carry-forward rules. Check our pensions hub.

State pension age rises to 67 next week. From 6 April, anyone born after 5 April 1960 must wait until 67 to claim. If you're affected, check your state pension forecast.

Build cash reserves. Two-thirds of hospitality businesses are cutting jobs. The ripple effects will reach adjacent sectors. An easy-access savings account at 4.5% is both prudent and productive. Six months' expenses is the minimum target.

Don't fix energy. The Ofgem cap dropped to £1,641 yesterday. Variable rates fall with it. Cornwall Insight's July forecast of £1,929 means the reprieve is temporary, but fixing now at £1,760 costs more than the current cap.

This article is for informational purposes only and does not constitute financial advice. You should seek independent financial advice before making any investment decisions.