Bank of England Governor Andrew Bailey has warned that risks to inflation remain "on the upside", leading to speculation that the central bank could increase interest rates. Speaking on Tuesday, Mr Bailey told MPs that energy prices "could be higher still" in the coming months, partly due to the Strait of Hormuz remaining largely blocked.
Oil prices saw a nearly one per cent increase in late trading on Tuesday, with Brent crude reaching just under $98 per barrel. This marks the highest level for Brent crude since July 23. The rise followed reports from Saudi Arabia's state-run press agency of attacks by Iran-backed Houthi militants on several energy facilities.
Dan Coatsworth, head of markets at AJ Bell, suggested that the recent jump in oil prices could concern global markets, potentially leading to fears that interest rates may stay elevated for longer as central banks aim to counter inflationary pressures.
The Food and Drink Federation (FDF) has issued a warning that food inflation is projected to reach four per cent later this year and exceed six per cent by next summer. This forecast is attributed to higher supply chain and energy costs resulting from the closure of the Strait of Hormuz.