Fuel Crisis Deepens Business Cost Squeeze: Petrol at 163p as Iran Conflict Enters Seventh Month

UK businesses face mounting operating cost pressures as fuel prices climb to their highest levels since the Iran conflict began in February 2026, with petrol reaching 163.6p per litre and diesel at 184.99p per litre, according to the RAC^[1]. The increases come as companies simultaneously navigate energy bill rises and new compliance costs, creating what analysts describe as a triple squeeze on margins.

The Iran conflict, which began on 28 February 2026^[1], has severely disrupted oil supplies through the Strait of Hormuz, a waterway through which around a fifth of the world's oil and liquefied natural gas is transported^[2]. This supply constraint has driven Brent crude prices to around $94 per barrel, up from approximately $70 before the conflict^[1].

Fuel Price Trajectory Since Conflict Outbreak

Wholesale oil prices have followed a volatile path since hostilities began. Brent crude peaked above $120 per barrel during the initial fighting, then fell back to near $70 in early July following a US-Iran framework deal^[1]. The subsequent collapse of peace talks drove prices back above $100 per barrel before settling at current levels.

These wholesale movements take approximately a fortnight to feed through to pump prices^[1]. In early July, the RAC recorded petrol at a low of 150.59p per litre and diesel at 164.52p per litre^[1]. Since then, both fuels have climbed steadily, with petrol now at 163.6p and diesel at 184.99p^[1].

Simon Williams, the RAC's head of policy, warned that drivers will "almost certainly start paying noticeably more at the pumps in the coming weeks" as oil prices remain elevated^[1]. While current prices remain below the summer 2022 peaks following Russia's invasion of Ukraine - when petrol reached 191.5p and diesel hit 199p^[1] - the sustained increases represent a significant cost burden for fuel-dependent businesses.

Analysts note that every $10 per barrel increase in oil prices pushes up pump prices by roughly 7p per litre^[1]. With renewed hostilities between the US and Iran, and the Strait of Hormuz expected to remain effectively closed until early 2027 according to Capital Economics^[3], further price rises appear likely.

Global Diesel Supply Constraints

The impact extends beyond petrol. In the United States, diesel prices hit an all-time high of $5.85 per gallon on 4 September 2026, according to the American Automobile Association^[2], compared to $3.71 a year earlier. This surpasses the previous record set following Russia's invasion of Ukraine.

Diesel is predominantly used by commercial vehicles including trucks, trains, boats, buses, and construction equipment^[2], meaning the price surge directly affects logistics and supply chain costs globally. UK diesel, while not at the all-time high of 191.54p reached on 15 April 2026^[1], remains elevated at 184.99p per litre.

Compounding Energy Cost Pressures

The fuel crisis coincides with mounting natural gas costs. Wholesale natural gas prices in the UK topped 185p per therm this week, reaching their highest level since late 2022^[3]. The European benchmark price hit €75 per MWh on 3 September 2026^[3], also a three-year high.

These wholesale increases will feed through to household and business energy bills. The Ofgem price cap rose in July and will increase by a further 4% in October, leaving a typical household paying £1,723^[3]. Cornwall Insight has forecast domestic energy prices could rise an additional 9% in the new year^[3].

The timing is particularly challenging as European countries scramble to replenish natural gas stores before winter. Storage levels are significantly lower than usual for this time of year, with countries facing a choice between buying gas now or potentially paying higher prices during winter months^[3].

Hamad Hussain, senior climate and commodities economist at Capital Economics, told the BBC^[3] that "the risks to gas prices are definitely tilted towards the upside", warning that the gas price could top €80 by the end of 2026. He noted that gas storage operators interviewed at the outbreak of the conflict expected to wait three to four months for the crisis to ease, but "we are about six months into the strait being effectively closed and that obviously has not happened"^[3].

Additional Regulatory Cost Burdens

While not directly related to energy costs, businesses also face new excise duties coming into force. HMRC announced on 1 September 2026^[4] that Vaping Products Duty and the Vaping Duty Stamps Scheme will start on 1 October 2026. The new excise duty of £2.20 per 10ml applies to all vaping liquids manufactured in or imported into the UK^[4].

Rachel Nixon, HMRC's Director of Indirect Tax, warned that businesses without HMRC approval by 1 October "cannot produce vaping products in the UK and may be unable to trade", and could "face operational delays and may be subject to civil or criminal sanctions"^[4].

UK Company Register Context

Across the UK company register, the operating environment for businesses remains challenging. As of the most recent snapshot, 109,788 companies across all sectors are in liquidation^[5], with an additional 4,604 in administration, 1,094 in receivership, and 2,317 in voluntary arrangement^[5]. These are economy-wide totals covering all industries.

The CompanyPulse company register^[5] shows 5,575,590 active companies out of a total 6,634,278 registered companies as of September 2026. In the past seven days, 10,423 new companies were incorporated^[5].

Among the most common business activities across the UK register, freight transport by road (SIC 49410) accounts for 70,760 registered companies^[5], while take-away food shops and mobile food stands (SIC 56103) represent 78,356 companies^[5]. Both sectors are particularly exposed to fuel price fluctuations due to their reliance on vehicle-based operations.

Outlook for Business Operating Costs

The confluence of rising fuel, energy, and regulatory compliance costs presents a sustained challenge for UK businesses through the remainder of 2026 and into 2027. With the Strait of Hormuz not expected to reopen until early 2027^[3], and a lag anticipated before energy flows freely through the waterway again, pressure on fuel and energy prices is likely to persist.

The official markets regulator has stated it has "not seen evidence of retailers actively changing their pricing strategies to take advantage of the crisis"^[1], suggesting current price levels reflect genuine supply constraints rather than opportunistic pricing.

For businesses with tight margins and limited ability to pass costs through to customers, the sustained elevation in operating expenses may force difficult decisions on staffing, investment, and viability. The coming months will test the resilience of sectors ranging from logistics and haulage to hospitality and retail, all of which face varying degrees of exposure to the triple pressure of fuel, energy, and compliance costs.