How Trump's Iran War Is Fuelling UK Cost-Of-Living Crisis

The market is treating this as a straight-through inflation shock, but the more interesting second-order effect is duration repricing: energy pass-through lifts near-term inflation prints while also reducing the odds of aggressive easing later, which matters more for rates-sensitive assets than the headline CPI move itself. In the UK context, the transmission is amplified because consumers are more exposed to transport and heating costs, so the hit shows up quickly in discretionary spending, retail volumes, and small-cap domestic earnings before it fully filters into wage negotiations.

The biggest loser is not just consumers but any business with weak pricing power and high freight intensity: supermarkets, parcel/logistics, airlines, and homebuilders face margin compression from both input inflation and softer demand. Meanwhile, vertically integrated energy names and firms with contractual pass-through benefit from a staggered lag: they can reprice faster than labor and logistics costs re-set, so the earnings uplift can persist for several quarters even if oil stabilizes.

The contrarian point is that the initial move in oil may be over-earnest if the market is extrapolating a persistent supply shock without evidence of physical disruption. If this is mostly a risk-premium spike, crude can mean-revert before the second-round inflation effects fully materialize, leaving rate-sensitive equities and sterling underperforming for longer than commodities themselves. The real tail risk is political: if inflation expectations de-anchor, the central bank reaction function becomes tighter even as growth slows, a stagflationary mix that usually hurts domestic UK equities more than it helps energy.