UK inflation jumps to 3.3% in March: Iran war drives fuel prices to three-year high

UK Consumer Prices Index inflation rose sharply to 3.3% in the 12 months to March 2026, up from 3.0% in February, according to the Office for National Statistics statistical bulletin released at 07:00 this morning. The figure is the highest in several months and marks a clear break with the disinflation trajectory that had defined early 2026.

The jump was driven primarily by motor fuels, which rose 4.9% year-on-year, and by a 10.0% month-on-month spike in air fares. The ONS attributes the fuel increase to supply disruption flowing from the Iran conflict; the air fare rise is the largest February-to-March move recorded since 2016.

The headline numbers

The CPIH headline of 3.4% — and a core CPIH rate of 3.3% — represent the broadest measures of UK price pressure. The largest upward contribution to both CPI and CPIH came from housing and household services, at 0.67 and 1.31 percentage points respectively. Housing and household services inflation ticked up to 4.3% on a CPIH basis, driven by a 95.3% annual surge in domestic heating oil prices (the highest reading since September 2022 on that series).

What broke: the disinflation story

Coming into 2026 the UK inflation narrative was straightforward — services inflation stubborn, goods inflation cooling, energy falling, core CPI on a gradual descent toward target. February printed CPI at 3.0% and core at 3.2%. Before the Iran conflict began, most economic forecasts expected headline CPI to approach the 2% target through spring 2026.

That story has now broken. Petrol prices have risen 25.1p per litre since 28 February per RAC data cited alongside the ONS release, and diesel 48.6p. This directly drove the 4.9% motor fuels reading. The Strait of Hormuz remains a flashpoint: approximately 20% of global oil and a significant share of global LNG passes through it, and disruptions there feed through to UK wholesale energy and transport costs within weeks.

Where the Bank of England sits

Governor Andrew Bailey told the BBC on 16 April that there are "difficult judgments to be made" on where interest rates go next. At its March meeting the Monetary Policy Committee noted it "will continue to closely monitor the situation in the Middle East and its impact on global energy supply and energy prices. It stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term."

Prior to the conflict, markets were pricing cuts. After a March meeting that minutes described as hawkish, markets now see a rate hold as the base case, with a rate rise not ruled out. Today's 3.3% print reinforces that repricing. The next MPC decision will come with considerably more data than March offered — and with the new inflation trajectory more visible.

What it means for borrowers, savers and businesses

For households, the immediate pressure is on variable-rate and tracker mortgages, where any policy response feeds through within weeks. Fixed-rate mortgages priced in anticipation of cuts are already being repriced. Savings rates, which had been drifting lower, are likely to stabilise.

For businesses, the single clearest signal is a planning one: cost inflation — particularly in fuel, logistics and travel — is not going away in Q2. Firms exposed to supply chains running through the Middle East or reliant on air freight are facing a second consecutive year of disrupted pricing assumptions. The OECD cut its UK 2026 growth forecast by 0.5 percentage points in March on energy grounds alone.

What to watch next

Three calendar items will materially shape the next reading. First, the Ofgem price cap announcement on 27 May for the July quarter — current Cornwall Insight forecasts suggest a rise toward £1,929 per typical dual-fuel household. Second, the next ONS CPI release on 20 May. Third, the May MPC meeting, where the committee will have the March CPIH and full-quarter transport data in hand.

Frequently asked questions

What was the UK CPI figure for March 2026?

According to the Office for National Statistics statistical bulletin released at 07:00 on 22 April 2026, the Consumer Prices Index (CPI) rose by 3.3% in the 12 months to March 2026, up from 3.0% in the 12 months to February. CPIH (the measure including owner-occupier housing costs) rose by 3.4%, up from 3.2%.

Why did inflation rise so sharply?

The single biggest driver was motor fuel. Per ONS, motor fuel prices rose 4.9% in the year to March, the highest reading since January 2023, as the Iran conflict tightened global oil supply. Air fares rose 10.0% month-on-month — the largest February-to-March rise since 2016. Food and non-alcoholic beverages inflation also accelerated to 3.7% from 3.3%.

Does this mean the Bank of England will raise interest rates?

The Bank's Monetary Policy Committee now faces competing pressures. Governor Andrew Bailey has publicly stressed there are 'difficult judgments to be made' on the direction of Bank Rate. Before the Iran conflict, rate cuts were expected through 2026; markets are now pricing in the possibility of a rate hike. The next MPC decision will be informed directly by today's figures.

What about core inflation?

Core CPI — which strips out food, energy, alcohol and tobacco — actually fell slightly to 3.1% in the 12 months to March, from 3.2% in February. CPI services inflation rose to 4.5% from 4.3%. Together this points to persistent underlying price pressures in services even as goods inflation drives the headline number.