Surging Oil Prices and the Risk of Stagflation | UK Economy News

Surging global oil prices can create a stagflationary shock for the UK economy. Prices have risen sharply due to geopolitical tensions in the Middle East. Because the UK is a net importer of oil, higher oil prices raise firms’ production costs, shifting short-run aggregate supply left and causing cost-push inflation. At the same time, households face higher fuel bills, reducing discretionary spending and weakening demand. Persistent high oil prices could push UK inflation toward 3–3.5% while lowering real GDP growth to around 1% or less.

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