Iran war and global inflation

The war between the United States and Iran began in February 2026 and has kept energy prices high since. Central banks have responded: the US Federal Reserve and the European Central Bank raised rates, and on 5 November 2026 the Bank of England raised Bank Rate by a quarter point to 4%, its first rise since August 2023, by an 8-1 vote. The bank said at least one more rise was likely if the conflict continues and forecast inflation peaking at 4.8% in the second quarter of 2027, with a worse case of 6.2% if oil peaks near $130 a barrel. On 9 November, G7 foreign ministers began two days of talks in Paris, where Europeans urged Washington to hold back from new strikes on Iran and to help restore shipping through the Strait of Hormuz. US Secretary of State Marco Rubio said diplomacy had made limited progress. The next Bank of England decision is due in December.