Goldman Sachs has warned that Brent crude could exceed $120 a barrel if Middle Eastern supply disruption continues. Sentoria examines the severe forecast, why the Strait of Hormuz matters and what prolonged high oil prices could mean for UK inflation, interest rates and business costs.
Political change, British Steel’s nationalisation, rising mortgage rates and renewed energy pressures shaped the UK business week. Sentoria reviews the main developments and considers the economic data, company results and policy decisions likely to influence the week ahead.
UK businesses face political change, rising mortgage rates and renewed market volatility as Andy Burnham prepares to become prime minister. China has condemned the nationalisation of British Steel, while Burberry reported improving sales despite disruption from the Middle East conflict.
US inflation fell more sharply than expected in June as lower gasoline and energy prices reduced the annual rate from 4.2% to 3.5%. The figures have eased expectations of an immediate Federal Reserve interest-rate rise, although renewed conflict in the Gulf and rising oil prices could reverse part of the improvement.
Coffee prices are rising across Britain as cafés face expensive beans, higher wages, employment taxes, business rates and volatile energy costs. A £6.50 flat white in central London highlights the pressure, although prices vary considerably across the country.
UK businesses are freezing permanent recruitment as weak demand, rising energy costs and uncertainty surrounding the Iran conflict push confidence and business output indicators to their lowest levels in years.
The UK economy is expected to have flatlined or contracted again in May as higher energy costs and weak service-sector activity weigh on growth. Stronger retail sales and positive three-month figures, however, suggest a fragile slowdown rather than a clear economic downturn.
Britain’s manufacturers are warning that high energy costs are pushing production overseas and threatening jobs, investment and industrial capacity. Government support schemes may help some energy-intensive firms, but industry groups argue that the UK still faces a structural competitiveness problem.
UK inflation held steady at 2.8% in May, giving the Bank of England more room to keep interest rates on hold. The figures offer some relief for households and businesses, but higher transport costs, services inflation and global energy risks mean borrowing costs are unlikely to fall quickly.
Inflation concerns are mounting ahead of the Bank of England’s June rate decision, with policymakers expected to hold Bank Rate at 3.75% despite renewed pressure from energy prices and rising public inflation expectations. For businesses and households, the likely pause offers stability, but not the lower borrowing costs many had hoped for.
