The Chancellor of the Exchequer, Rachel Reeves, is facing mounting pressure to delay a planned fuel duty increase amid instability in the Middle East, which is driving up global oil prices.

However, the government has resisted calls to change course.

Delivering her spring statement, the Chancellor stated that sticking to the government’s plans provides economic stability, which is essential for the good of the UK economy.

 Pumped up

Industry groups, opposition politicians and campaigners have urged the Treasury to reconsider the planned end of a temporary 5p fuel duty cut, warning that motorists and businesses could be hit by a “double blow” if rising oil costs coincide with higher taxes at the pump.

Despite those concerns, Reeves confirmed in her spring economic update that the duty cut will expire later this year, with increases phased in over the following months.

The rise is expected to begin with a 1p increase in September, followed by further increases in December and early 2027, marking the first fuel duty rise in around 15 years.

 

Instability

The decision comes at a volatile moment for global energy markets.

Escalating tensions and military activity involving Iran have already pushed oil prices higher and created fears of further disruption to key shipping routes such as the Strait of Hormuz, through which a significant share of the world’s oil supply passes.

Business groups say that the combination could quickly feed through to higher petrol and diesel prices in the UK.

The trade body Logistics UK is among those calling for the government to rethink the timing of the tax increase.

The group warned that supply chain disruption linked to the Middle East conflict is already pushing up global fuel costs, which could in turn raise prices for consumers and businesses across the country.

Logistics companies operate on tight margins and rely heavily on fuel, meaning any increase in costs is likely to be passed down through the economy in the form of higher prices for goods and services, the organisation said.

Growing concerns

Political pressure has also been growing.

Critics argue that increasing fuel duty during a period of geopolitical uncertainty risks worsening the cost-of-living pressures many households are already facing.

Some campaigners have warned that pump prices could surge significantly if the conflict intensifies and oil supplies tighten further.

Analysts have suggested the disruption could push crude prices sharply higher, which would inevitably be reflected at UK forecourts.

However, the Chancellor has signalled that maintaining fiscal stability remains the government’s priority.

Reeves has emphasised the need for predictable economic policy despite global instability, arguing that the public finances must remain on a sustainable footing.

The current fuel duty discount was originally introduced during the energy price shock following Russia’s invasion of Ukraine.

Successive governments have extended this several times, but in last year’s Budget statement, it was stated that increases would begin this year.

 

Time will tell

For motorists, the prospect of higher taxes arriving just as oil markets become more volatile is causing concern.

Fuel prices have historically been a flashpoint in the UK, with spikes in costs triggering protests and political pressure on governments to intervene.

Economists also warn that rising energy prices could have broader implications for the British economy, potentially pushing inflation higher and complicating efforts to lower interest rates.

For now, though, the government appears determined to stick with its existing plan.

While ministers say the current 5p discount will remain in place until later in 2026, the scheduled increases remain on track, despite intensifying calls for a rethink as the situation in the Middle East unfolds.

With energy markets still highly sensitive to geopolitical events, the debate over fuel duty and the pressure on the Chancellor are unlikely to ease anytime soon.

It will undoubtedly depend on the length of hostilities and on how prices at the forecourts are affected in the coming weeks and months.