Britain ‘faces recession’ as oil soars back to $100 a barrel

The price of oil shot back above $100 a barrel on Monday as Britain’s battered economy lurches towards stagflation and recession.

In another rocky session on financial markets, Brent crude rose as much as 9 per cent to almost $104.

The jump in the oil price, which took its toll on global stock markets with the FTSE 100 slipping lower in London, sparked warnings that Britain faces a painful bout of stagflation and even recession.

It came after Donald Trump vowed to launch a naval blockade of the Strait of Hormuz after peace talks between the US and Iran broke down over the weekend.

The move, which will stop all ships entering and leaving Iranian ports, leaves a fragile ceasefire hanging in the balance and threatens further disruption to energy exports.

Oil and gas prices have soared since the war began, with crude up around 40 per cent from close to $70 a barrel in late February.

Jorge Montepeque, managing director at major oil trader Onyx Capital Group, said prices could hit $150 if the naval blockade remains in place.

Thomas Pugh, chief economist at consulting firm RSM UK, said the blockade ‘means stagflation looks like the best-case scenario of the UK’.

He added: ‘The risks of a recession are clearly rising.

‘President Trump’s announcement of a naval blockade of the Strait of Hormuz has shifted the focus back to the risks of higher energy prices and recession.

‘It’s now looking inevitable that the UK is in for another bout of stagflation. Further constraining supply leaving the region pushes energy prices to levels that would trigger demand destruction in Europe, the UK and Asia.

‘That would tip the UK into recession.’

The International Monetary Fund will on Tuesday slash its global growth forecasts as elevated energy prices take their toll – with the UK economy seen as particularly vulnerable.

The economy is already floundering with growth flatlining, inflation the highest in the G7 and unemployment at levels last seen during the Covid-19 pandemic five years ago. 

The surge in the oil price has hit drivers in the pocket with average petrol prices up nearly 20 per cent since war broke out to 158.27p a litre – adding nearly £14 to the cost of filling the average 55-litre tank in a family car.

Diesel has risen even more sharply, climbing 35 per cent to 191.50p – adding £27 to the cost of filling up.

The RAC said the fall in the price of oil to below $100 a barrel last week had offered some relief to motorists – but warned this could be undone if oil continues to rise.

RAC head of policy Simon Williams said: ‘While pump prices have technically risen for a record 43 straight days, the increases have almost ground to a halt. There’s now scope to see prices finally starting to go the other way.

‘But, as always, it’s a highly volatile situation with much depending on what happens with the Strait of Hormuz.

‘And, if the oil price was to go well over $100 again this week, any hopes of slight forecourt reductions will inevitably disappear.’

Daniela Hathorn, senior market analyst at Capital.com, said ‘geopolitical escalation in the Middle East’ is ‘reintroducing uncertainty’ to the market.

‘After a brief period of relief following ceasefire hopes, the breakdown in talks and the emergence of a blockade of the blockade strategy by the US has pushed the narrative back toward duration risk: how long this conflict will last and how deeply it will impact the global economy,’ she said.

‘Markets are still grappling with how to price the situation, caught between the risk of further disruption to global energy flows and the possibility of another last-minute de-escalation.’