Ceasefire Hopes Die Overnight: Oil Back at $107, Record Fuel Price Rises, and the BoE's Impossible Choice

March's fuel price data, confirmed by the RAC this morning:

• Petrol: up 20p per litre in March (from 132.83p to 152.83p), now averaging 153.7p on 2 April
• Diesel: up 40p per litre (from 142.38p to 182.77p), now 184.2p — nearly double the previous record monthly rise
• Cost per fill: diesel £22 more, petrol £11 more than before the war

Every $10 increase in oil pushes pump prices up roughly 7p per litre, with a two-week lag. With Brent back at $107 this morning, April will be worse. Prices remain below summer 2022 peaks (petrol 191.5p, diesel 199p after Russia invaded Ukraine), but the rate of increase is steeper.

The Food and Drink Federation warned yesterday that food inflation will hit 9% by year-end — nearly triple their pre-war forecast. Diesel drives UK food logistics. Every 10p per litre feeds directly into distribution costs. Chancellor Reeves met supermarket bosses yesterday but offered nothing concrete. No fuel duty cut. No VAT relief. For how energy costs affect the broader household picture, see our savings hub.

This morning's gilt market:

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

March closed as the worst month for UK gilts in over a year. The 10-year touched 5.02% on March 27; the monthly average printed above 4.85% — a 42 basis point jump from February's 4.43% average. The 75+ basis point monthly move matched the 2022 gilt crisis.

Every 100 basis points of yield increase adds approximately £12 billion to annual government debt servicing costs. Reeves has already lost £3 billion in fiscal headroom from March's selloff. Yesterday's brief dip offered hope of a ceasefire dividend restoring that headroom. Today, it's gone.

The UK remains the most vulnerable major economy to this conflict, per the OECD. Their 4% inflation and 0.5% growth forecasts assumed a relatively short conflict. Trump just extended the timeline. For a deeper look at gilts as an investment, see our gilts hub.

The Bank of England base rate sits at 3.75% since December 2025. Six weeks ago, markets priced two cuts in 2026, targeting 3.25%. Today they price two to three hikes to 4.25-4.50%. That's a 125-175 basis point swing in expectations.

The BoE's CFO panel survey published today showed business price inflation expectations rising to 3.7% (from 3.4% in February), with 57% of firms reporting high or very high uncertainty — up 10 percentage points. This is the second-round inflation effect that central banks dread: businesses raising prices not because of demand, but because of cost pass-through.

The April 30 MPC meeting will hold at 3.75% — 90% of forecasters agree. The committee needs the April inflation print (due mid-May) before acting. CPI was 3.0% in February, the last reading before oil surged. The BoE expects 3.5%+ through 2026.

The trap is classic stagflation. Raise rates to fight oil-driven inflation and you crush mortgage holders already reeling from a 100 basis point rise in four weeks. Hold rates and inflation spirals — the FDF's 9% food inflation forecast assumes energy costs only stay elevated, not that they keep climbing. Trump just made them climb. For context on how rate decisions affect households, see our mortgages hub.

The BoE's Financial Policy Committee confirmed yesterday: 5.2 million UK households face higher mortgage payments by 2028 — 1.3 million more than pre-war forecasts.

The scale of the one-month repricing:

Mortgage availability fell by 1,283 products — 17% of the market in one month. Remortgagers face repayment increases of £417-444 per month. Sub-4% standard deals are gone.

Berkeley Group stopped buying land. Barratt Redrow fell 3.8% this morning. Nationwide warned the housing market will soften. The housing recovery Reeves was counting on for her building targets is freezing.

Yesterday we said: wait 48 hours for Trump's speech. He's spoken. The ceasefire dividend is not coming this month. The five-year fix at 5.75% gives certainty, and most offers hold for six months. Lock now. If a genuine ceasefire materialises later, renegotiate. For anyone remortgaging, the calculation is clear. Use our mortgage calculator to model both scenarios.

ISA allowance — use it by Sunday. Four days. The £20,000 limit resets on April 6 and cannot be carried forward. Cash ISAs offer around 4.5% tax-free. Our ISA guide covers the full decision.

Lock the mortgage. The case for waiting is gone. Five-year fix at 5.75%, six-month offer validity. See our mortgages hub.

State pension age rises to 67 next week. From 6 April, anyone born after 5 April 1960 must wait until 67. Check your state pension forecast. State pension rose 4.7% to £241.30 per week for those already claiming.

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. The gov.uk annual allowance rules explain carry-forward. Check our pensions hub.

Build cash. Two-thirds of hospitality businesses are cutting jobs. A six-month emergency fund in an easy-access savings account at 4.5% is the minimum.

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