Petrol dips, FTSE set to jump, but cost-of-living pressure remains

 
The move has sparked a global relief rally, with the Britain’s FTSE 100 set to open higher as investors respond to the reduced risk of a major energy shock.

But while markets are lifting and fuel prices are easing, the pressure on the UK economy remains.

Nigel Green, CEO of global financial advisory giant deVere Group, says: “Drivers will feel some short-term relief as petrol and diesel prices edge lower, and markets are reacting strongly to the pause.

“But oil remains elevated, and that continues to feed through the entire economy, into prices, business costs and investment decisions.”

The Strait of Hormuz carries around a fifth of global oil supply. Fears of ongoing disruption had driven crude sharply higher, pushing up fuel prices and intensifying cost pressures across the UK.

Even with the latest pullback, oil remains well above earlier levels, with consequences that extend far beyond the forecourt.

Nigel Green says: “Fuel is the most visible impact, but higher oil affects far more than what people pay at the pump.

“It raises the cost of transporting goods, running businesses and producing everyday items, which keeps pressure on household finances across the board.”

For households, any drop in petrol prices will be welcome, but it is unlikely to translate into a broader easing in the cost of living.

He explains: “There may be some short-term relief, but food prices, travel costs and basic goods remain elevated because businesses are still dealing with higher input costs and are unlikely to reduce prices quickly.”

For UK businesses, particularly those reliant on transport and energy, the environment remains difficult despite the easing in oil.

Nigel Green says: “This gives companies a bit of breathing space, but costs remain high.

“Many firms will hold prices where they are because margins have already been squeezed, and that means consumers continue to feel the pressure.”

Smaller firms remain especially exposed, with less flexibility to absorb rising costs.

He adds: “Large companies can manage some of the pressure. Smaller businesses often pass costs on or take the hit themselves, which affects pricing, hiring and investment.”

For investors, the reaction has been immediate. The FTSE 100 is tracking global gains, supported by its heavy weighting in energy, financials and multinational firms.

Nigel Green says: “The FTSE is highly sensitive to global developments like this.

“A reduction in geopolitical risk boosts confidence, supports financial stocks and encourages capital back into UK equities.”

Energy stocks may see some short-term volatility as oil pulls back, but the broader backdrop remains supported by ongoing supply risks.

He says: “Oil is unlikely to return to previous lows any time soon. The geopolitical premium remains embedded, and that continues to underpin energy markets.”

At the same time, sectors such as travel, leisure and retail could benefit from lower fuel costs and improved sentiment, helping to broaden the rally.

Nigel Green adds: “Investors are rotating back into areas that were hit hardest during the recent volatility, including consumer-facing sectors and tech.”

The implications for interest rates remain central. Elevated oil prices continue to influence inflation, complicating decisions for the Bank of England.

He explains: “Higher oil feeds into inflation across the economy, and that keeps interest rates higher for longer.

“This affects households through borrowing costs, businesses through investment decisions, and investors through market expectations.”

Attention now turns to whether the two-week pause develops into something more lasting.

Nigel Green concludes: “This is a clear short-term positive. The FTSE is set to rise and households will see some relief at the pump.

“But the underlying pressures haven’t gone away. Oil is still higher, costs across the economy remain elevated, and interest rates are not going to be falling as quickly as had been expected.”