The inflation problem was already bad. Then the war started.
UK inflation came in at 3% for the year to February — flat on January and still well above the Bank of England’s 2% target. The timing couldn’t be worse. This is the last clean price data we’ll get before war in the Middle East began driving oil and gas prices sharply higher. Analysts are braced for things to get considerably messier from here, and the Bank of England is in a very awkward spot.
What the February Numbers Actually Say
The Office for National Statistics confirmed CPI held at 3% for the 12 months to February — exactly in line with what City economists predicted, but still a full percentage point above target.
Dig into the detail and there are a couple of minor bright spots. Services inflation — a closely watched gauge of wage-driven price pressures — eased slightly to 4.3%, and core inflation (stripping out volatile food and energy) came in at 3.2%. Neither figure is alarming on its own. But neither is anywhere near comfortable either.
The problem is that Bank policymakers are unlikely to spend too long with this data. CBI lead economist Martin Sartorius called it “old news”, warning that a return to the 2% target may only come next year.
Why the War Changes Everything
The real issue is what’s happened since February ended. The conflict in the Middle East has blocked the Strait of Hormuz — the critical chokepoint through which around a fifth of global oil, gas, fertilisers and key chemicals flow.
The consequences for prices have been swift. International oil prices surged toward $120 per barrel at the height of the conflict, up from around $68 beforehand. Brent Crude was hovering above $100 as of Tuesday’s trading session. UK natural gas futures have spiked more than 80% since the war began.
At the petrol pump, that’s already feeding through to higher fuel costs. And Britons have been put on notice that the Ofgem energy price cap will reflect further changes from July.
The Bank of England’s Dilemma
Before the war, the Bank expected inflation to fall back to target from April. It has since revised that up to 3% for next month, with further rises pencilled in beyond that. At last week’s Monetary Policy Committee meeting, rate-setters warned they stood “ready to act” if prices jumped higher.
Chief economist Huw Pill struck a firm tone in a speech on Tuesday, saying uncertainty was not an “excuse” for inaction. Some Wall Street economists are now pricing in two rate hikes to contain the inflationary fallout.
Not everyone is panicking, though. WPI Strategy’s Martin Beck believes it’s “more likely” the MPC holds rates steady for longer rather than hiking — watching carefully before committing either way. With households and businesses already sensitive to cost-of-living pressures, the Bank is walking a tightrope.
Key Takeaways
UK inflation was already sticky before a single bomb dropped. Now energy markets are in turmoil and the data is about to get uglier. The Bank of England finds itself in classic stagflation territory: rising prices, slowing growth, and a rate decision no one envies. Whether it holds or hikes, it needs to move decisively — and soon. Keep an eye on our economics coverage for the latest rate and inflation updates.
FAQ
What was UK CPI inflation in February 2026?
CPI inflation was 3% for the 12 months to February 2026, unchanged from January. This remained well above the Bank of England’s 2% target.
How has the Middle East war affected UK inflation?
The conflict has blocked the Strait of Hormuz, driving oil prices near $120 per barrel and UK gas futures up over 80%. Higher energy costs are already filtering through to petrol prices and the Ofgem energy price cap.
What is the Bank of England expected to do with interest rates?
The MPC has said it stands “ready to act” if prices rise further. Some economists expect two rate hikes, while others believe the Bank will hold rates steady and monitor the situation closely.
What is UK services inflation currently?
Services inflation eased slightly to 4.3% in February, while core inflation came in at 3.2% — both still elevated relative to the Bank of England’s target.
When will UK inflation return to the 2% target?
Before the war, the Bank of England expected inflation to return to target from April. It has since revised forecasts upward. CBI economist Martin Sartorius suggested the target may not be reached until 2027.
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Effective Date: 15th July 2025
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