The latest UK inflation figures already look dated, capturing a February backdrop that has since been overtaken by a sharp deterioration in the global energy outlook.
This latest print offers only a backward-looking snapshot of an environment that has since been fundamentally reshaped by a sharp escalation in Middle East tensions and the resulting surge in global energy prices.
At face value, the inflation data pointed to a cautiously improving picture. Headline inflation held steady, core pressures were broadly in line with expectations, and the trajectory still appeared consistent with a gradual return towards the Bank of England’s 2% target. But that narrative has been rapidly overtaken by events. A renewed spike in oil and gas prices has injected fresh momentum into the inflation outlook, raising the prospect that February may mark a near-term floor rather than a staging point for further disinflation.
Crucially, this external shock is colliding with an inflation backdrop that was already proving sticky. Services inflation remains elevated, wage growth has shown resilience, and upstream cost pressures, particularly in manufacturing, were beginning to reaccelerate even before the energy shock hit. The risk now is not just higher headline inflation, but a more entrenched and broad-based resurgence in price pressures as energy costs filter through supply chains and into consumer prices.
For policymakers, the implications are significant. What had looked like a clear path towards policy easing has become far more uncertain. Markets have already begun to reprice the interest rate outlook, with expectations shifting away from cuts and towards the possibility of further tightening if inflation proves more persistent. The Bank of England, meanwhile, must weigh the extent to which it can, or should, look through another energy-driven shock, particularly given the growing risk of second-round effects and rising inflation expectations.
In short, the February data may tell us where inflation was—but the real question for investors is where it is heading next.
Industry experts react to the latest data below:
Daniel Casali, Chief Investment Strategist at wealth management firm Evelyn Partners, comments:
‘This the inflation reading for February is already an outdated snapshot of UK price dynamics, given that it predates a sharp rise in global energy prices triggered by the escalation of conflict in the Middle East at the end of last month. Since then, wholesale natural gas prices have surged by more than 70%, the Brent crude oil benchmark has risen by 36%, and unleaded petrol at the pump has increased by nearly 7%.
‘What we do learn today is that this mounting external pressure on inflation in the coming months is coming on the back of domestic inflation pressures that were already firming before that oil shock hit.
‘Service sector inflation had been running at elevated levels, supported by resilient wage growth and rising input costs. Forward‑looking services producer price indicators suggest that service‑sector inflation may accelerate further, especially as energy‑driven pressures feed into broader price‑setting behaviour. In the manufacturing sector, prices are also rising. The March Purchasing Managers’ Index for manufacturing input prices recorded its largest monthly jump since 1992.
‘Financial markets have reacted swiftly and traders have moved to price in nearly three separate quarter‑point Bank of England (BoE) rate hikes, reflecting expectations that headline CPI will remain above the 2% target for longer as energy‑related inflation becomes more entrenched.
‘The Bank’s 19 March Monetary Policy Committee (MPC) communication acknowledges that monetary policy cannot offset global energy shocks. However, it also highlighted heightened concern over domestic second‑round effects and the risk that sustained higher energy prices could entrench broader inflationary pressures. The statement concluded by noting that the MPC “stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term” – indicating a clear leaning toward further tightening. This represents a notable shift away from the Bank’s earlier easing bias.
‘The BoE will also be concerned that inflation expectations become unanchored. In March, the latest Citi/YouGov survey showed inflation expectations for the next 12 months rising sharply to 5.4% from 3.3%, reaching their highest level since March 2023 and reversing much of the disinflationary progress seen in previous months.
‘With geopolitical shocks and strengthening domestic cost pressures, the inflation trajectory appears increasingly less benign. Rising interest rate expectations have already placed upward pressure on gilt yields. The 2‑year gilt is trading at 4.6%, its highest level in nearly two years, and could well go higher.’
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said;
“Today’s inflation report is little more than a relic of the world before the Iran conflict. While the February report was broadly in line with expectations, and confirms that inflation was on a path back to 2%, the outlook for inflation has radically changed. Yesterday’s PMIs offered the first sign of how much the energy price shock is changing the inflation outlook, and this will start to show up in next month’s data, before building later this year when the energy price cap moves higher. Clearly the Bank of England is worried about inflation. And while the underlying weakness of the economy means rate cuts would be painful, policymakers may decide they do not have the luxury of “looking through” higher inflation, especially if the conflict does last longer than the market currently seems to be hoping.”
Lindsay James, investment strategist at Quilter:
“Today’s inflation reading of 3% on the headline measure and 3.2% on the core gauge needs to be read with caution. It captures February, so it predates the escalation in the Middle East at the very end of the month. Markets have already priced in that shift, which means this release is effectively looking in the rear‑view mirror.
“Oil sat around $70 throughout February but has traded above $90 for most of March. European gas prices are roughly 60% higher than their February levels. Businesses are already feeling the squeeze even if households are still shielded by the lagged effect of the energy price cap. Normally the Bank of England looks through energy volatility, but the severity of the current shock has forced policymakers to signal they are ready to act if necessary. Hopes of rate cuts this year have largely evaporated, and several hikes can no longer be ruled out.
“That is why today’s CPI print is old news. It shows an economy where inflation appeared to be stabilising and was expected to drift towards 2.1% in Q2, helped by earlier gas price declines and supportive energy policy. But that benign path has already been overtaken by what has been described by the IEA as the “greatest global energy security threat in history”. For that reason, February is likely to represent the low point for UK inflation for some time.
“The real question now is how persistent this new inflationary pulse becomes. In the short term the impact may be contained. But if elevated energy prices hold, they will flow through the EPC mechanism from July and risk setting off second‑round effects across goods, services and higher wage demands. In 2022, when labour was in short supply and before the dawn of the AI era, these demands were in many cases met. However in 2026 the balance of power has changed, with employers rather than employees holding the cards.”
Emma Wall, Chief Investment Strategist, Hargreaves Lansdown:
“As expected by the market, inflation held steady in February. Today’s print is not the influential one it usually is for bond and equity pricing. Instead, the Iran war, oil prices and where inflation may go from here dominates. Gilt yields, having hit highs earlier in the week, last seen in the global financial crisis, have tempered on the hope of resolution. We think the conflict is likely to impact next month’s data, but it will be transient, and therefore unlikely to force Bank of England policy. We don’t think the next interest rate decision is a hike, rather a pause before returning to the cutting cycle.”
Charlie Ambler, Co-Chief Investment Officer, Partner at wealth management firm Saltus, said:
“While we expected February’s inflation data to remain stable around 3%, increasing oil prices are widely expected to push up the headline rate of inflation to near double the 2% target later this year, threatening the Bank’s slow and steady rate cutting cycle and frustrating markets. Should this materialise, markets are unlikely to respond well.
“While the Bank of England has signalled a cautious and data dependent approach to monetary policy, resulting in a hold at 3.75% last week, financial markets have already reacted sharply to the changing global outlook. Investors are now pricing in the possibility of multiple interest rate increases this year, with some expectations pointing to as many as four rises before the end of 2026. The gap between market expectations and the Bank’s own guidance highlights just how uncertain the inflation outlook has become.”
“Amid this backdrop, policy remains finely balanced. While the Bank remains committed to responding to incoming data, the risk of renewed inflationary pressure later in 2026 remains firmly front of mind for investors. Much will depend on the trajectory of energy prices and how long geopolitical tension persist.
“After a period of relative calm and strong performance across risk assets in early 2026, investors are now focused on the economic and financial implications of rising geopolitical tension. The key message, therefore, remains one of discipline. As geopolitics continues to shape asset allocation decisions, investors must not lose their focus on quality and resilience, delivered by a balanced approach to portfolio construction.”
Susannah Streeter, chief investment strategist, Wealth Club
“February’s inflation snapshot shows the calm before the storm of higher prices. Before the war with Iran broke out, causing destruction and chaos to energy facilities and supply routes, these numbers demonstrate that the price spiral had paused, with the headline rate of inflation staying at 3%.
Prices at the pumps had fallen back, easing the pressure on motorists and giving consumers a bit more to spend. Clothing, footwear, furniture and household goods rose slightly in price.
What a difference a month makes. Even though oil has retreated from the frighteningly high levels hit over the past few weeks, Brent crude is still hanging stubbornly around $100 a barrel, and gas prices remain highly elevated.
Higher energy prices risk being passed on by companies to consumers, and that will be the big worry going forward. Already, core CPI, stripping out volatile energy and food prices, rose slightly from 3.1% to 3.2% in February, indicating that underlying price pressures remain. These are set to intensify, given that energy and freight costs are mounting and firms are likely to want to pass on these extra costs.
President Trump is teasing the world, claiming negotiations are showing significant progress, with a 15-point plan aimed at an initial month-long ceasefire apparently on the table. But conflict is still raging and will be highly complex to solve.
While the key Strait of Hormuz is being opened to ‘non-hostile’ vessels, there will be no safe passage for ships flagged as allies of the US. Right now, given how wide Iran’s circle of enmity appears to be, the Strait will be a highly difficult route to navigate, and production is likely to remain depressed in Gulf states, which are struggling to store crude built up with nowhere to go.”
Michael Metcalfe, Head of Macro Strategy at State Street Markets, reacts:
“Inflation matched forecasts in February, but interest rates and the Bank of England have already moved on. State Street PriceStats data already shows UK retail fuel prices up more than 10% in the first twenty-three days of March. This marks a rate of pass through into retail fuel prices close to double what we observed in the immediate aftermath of Russia’s invasion of Ukraine in 2022. It underlies the dramatic shift in the outlook for headline inflation and, potentially, interest rates already underway.”
Zara Nokes, Global Market Analyst at J.P. Morgan Asset Management (JPMAM) says:
“For the Bank of England, today’s inflation data is in effect old news, with attention now firmly on what is coming down the tracks as a result of the conflict in the Middle East. Nonetheless, the upside surprise in core inflation today will be of concern for the Bank given it shows we are still contending with sticky price pressures even before accounting for the recent spike in energy prices.
The energy shock will certainly put upward pressure on inflation over the next couple of quarters, but we are very unlikely to see an inflation spike in the same magnitude as 2022. We are in a very different world; the labour market is in a much weaker position, and this therefore makes it far less likely that workers – concerned about rising costs – feel able to push for higher wages and thus entrench price pressures more broadly. In my view, therefore, the Bank of England should not need to be hiking rates this year, and staying on hold for an extended period of time should be sufficient to anchor inflation expectations without compounding growth weakness.”
Derrick Dunne, CEO of YOU Asset Management, has commented on this morning’s inflation data from the ONS:
“These latest data from the ONS are possibly the most unhelpful in recent history and we all know the reason why. They capture the precise point in time before which the conflagration in the Middle East began and do nothing to help us understand the pressure households will now be facing as prices skyrocket at forecourts across the UK.
“Further, because of the intricacies of the energy price cap we won’t know the true extent of the damage to the economy for some time – nor will headline inflation reflect the problem properly until the Summer at least.
“What is clear though is rates are not going to fall until we know more. There are now some indications the crisis might be entering a negotiated end game – but that is by no means guaranteed.
“Ultimately the Bank of England has a job to balance its mandate to control inflation against economic problems such as employment and GDP which are not its primary role. There is a rising chorus calling for rate setters to look through the coming energy price shock.
“This is because the shock is outside of its control, households are already under pressure on day-to-day spending and excess savings have been whittled down by the past few years. To hike into this would guarantee an economic downturn simply because the economy cannot tolerate the level of rate we’re at, no matter what external energy prices are doing.
“Anyone unsure what this could mean for their long-term financial plans should consider consulting with a financial planner.”
Rob Morgan, Chief Investment Analyst at Charles Stanley, part of Raymond James Wealth Management, comments:
“Today’s inflation figures offered little surprise. Headline CPI held at 3% in February and, although core inflation edged up slightly to 3.2%, the overall picture would normally have been consistent with a continued path towards 2% in the months ahead. In that world, the Bank of England would have had a clear runway for interest rate cuts, especially with a weakening labour market set to weigh on demand.
“But this dataset already belongs in the rear‑view mirror. The escalation in the Middle East has upended what looked like a reassuring disinflation story, and UK households and businesses now face the beginning of a renewed inflationary tide as oil and gas prices spike.
“Before the conflict, UK inflation was expected to fall to 2% within a year. Growth was subdued, and the labour market was showing signs of cooling. Since then, Brent crude has surged around 40% and natural gas prices more than 75%, dramatically shifting the outlook.
The most immediate pressure is visible at the petrol pump and in business energy costs. But from July onwards, households are also likely to feel the impact through higher energy bills. As a large net importer of energy, the UK is acutely exposed to global wholesale price rises.
“The pain doesn’t stop with fuel, heating and power. Even firms that don’t directly use oil or gas face rising costs through energy‑intensive supply chains and freight. Food prices, which are sensitive to transport and fertiliser costs, also risk another push higher. This creates a potential second‑round effect on inflation as businesses attempt to recover squeezed margins.
“Forecasts have therefore been hastily rewritten. Instead of drifting back to the Bank of England’s 2% target, inflation could now head towards 4% by year‑end – but it’s an outcome that hinges almost entirely on how long the conflict disrupts flows through the Strait of Hormuz.”
Chris Beauchamp, Chief Market Analyst at IG:
“Today’s inflation data from the UK, like that from the US, comes from a different time, before Donald Trump decided to upend the global economy and spur a new wave of inflation. If the conflict isn’t resolved quickly, and oil prices keep rising, we may look back at early 2026 as a halcyon period of low price growth. Andrew Bailey will definitely feel wistful about an era when he could look forward to cutting rates rather than thinking about having to increase them.”
