Middle East conflict raises energy price expectations, Bank of England may resume rate hikes above 4%

Golden Ten Data reported on March 4 that the National Institute of Economic and Social Research (NIESR) in the UK stated that if the surge in energy prices caused by military actions in the Middle East continues, the Bank of England may be forced to raise its benchmark interest rate back above 4%. NIESR's analysis shows that if crude oil prices remain at $100 per barrel throughout the year and natural gas prices rise by another 50%, it will push up the UK's inflation rate in 2026 by 0.7 percentage points and suppress output growth by 0.2%. The institution pointed out that this would trigger a tighter monetary policy response, with interest rates expected to be about 0.8 percentage points higher than the baseline scenario this year. Currently, the Bank of England's benchmark interest rate is 3.75%. The analysis also mentioned that if the energy price shock is relatively short-lived, the inflation rate will rise by about 0.3 percentage points, and the Bank of England may be able to ignore its impact.