Households across the United Kingdom are being warned to expect higher prices for months to come as the economic fallout from the Iran conflict continues to disrupt global markets.
Businesses say soaring energy costs, shipping disruption and rising raw material prices are already pushing up prices in shops, despite attempts by retailers to shield consumers through discounts and promotions.
Fresh inflation figures from the British Retail Consortium showed shop price inflation rose to 1.2% in May, slightly above the recent three-month average.
Furniture, health and beauty products were among the sectors recording the sharpest increases.
Retailers blamed higher oil prices and ongoing disruption linked to the closure of the Strait of Hormuz, a key global shipping route for oil and gas supplies.
Although some supermarkets continue to offer discounts and promotions, industry leaders warned businesses cannot absorb rising costs forever.
Helen Dickinson said: “While retailers work hard to keep prices down for customers, they continue to face significant cost pressures, including higher energy bills and disruption linked to the conflict in Iran.”
“Businesses cannot absorb these costs indefinitely, which risks pushing prices higher in the months ahead.”
The BRC also called on the government to reduce energy-related taxes and cut regulations affecting businesses.
Research from the British Chambers of Commerce found that 80% of companies have either already been affected by the Middle East conflict or expect future disruption.
Manufacturing firms were among the hardest hit, with many businesses reporting rising energy bills and supply chain problems.
William Bain warned that even if ceasefire talks between the US and Iran succeed, the financial impact will continue.
“Even if the current ceasefire soon signals the end of the conflict, the economic reverberations will be felt for many months to come,” he said.
“The geopolitical kaleidoscope has been shaken, and there’s no quick fix.”
“The ongoing uncertainty over the strait of Hormuz is deeply worrying for UK businesses relying on that maritime passageway.”
According to the BCC, three-quarters of firms expect energy bills to rise further over the next year, while more than a third fear they may struggle to pay future costs.
Business groups are now urging ministers to introduce more support measures, including reducing renewable levies on company energy bills and improving protection against volatile energy prices.
A government spokesperson said officials recognise the pressure businesses are facing.
“We know many businesses are facing difficulties and the situation in the Middle East is adding to their costs,” the spokesperson said.
The government pointed to existing support measures, including plans to reduce electricity costs for thousands of manufacturing firms and additional aid for energy-intensive industries such as chemicals and ceramics.
Despite ongoing promotions in some retail sectors, economists warned that rising household bills and weakening consumer confidence could continue to slow spending across Britain throughout the year.