The UK inflation rate stayed at 3% in the year to February as lower fuel prices were offset by a rise in the price of clothing.

However these official figures were gathered before the US-Israel war with Iran began - when the price of petrol was at its lowest since June 2021.

Pump prices for petrol and diesel have since soared following a surge in wholesale oil prices since the conflict started.

This is expected to have a knock-on effect for energy prices and other things such as leisure and food costs as manufacturers and firms pass on costs.

The Office for National Statistics inflation figure for February, which measures the rate of price increases over a year, remained the same as it was in January after months of steady falls.

Although the inflation rate has dropped from a high of 11.1% in October 2022, prices themselves are not coming down, but simply rising at a slower pace.

Chief economist of the Office for National Statistics Grant Fitzner said: "After last month's slowdown, annual inflation was unchanged."

"The largest upwards driver was the price of clothing, which rose this month but fell a year ago.

"This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices."

The ONS said clothing and footwear prices rose by 0.9% in the 12 months to February compared to no change in price in the 12 months to January.

Meanwhile, discounted alcohol also pushed the overall inflation figure down, the ONS said, adding that alcohol and tobacco saw their lowest recorded inflation rate since February 2022.

The ONS's February figures included, for the first time, supermarket scanner data, which replaced many of its physically collected prices, which the ONS said gave it a more accurate idea of overall food inflation.

James Palmer runs the Acme Bus Company in Saffron Walden and says rising fuel prices since the start of the Iran war are already having an impact on the business.

Every day, hundreds of school children in Essex and Hertfordshire rely on his buses to get them to and from school.

"It's the unpredictability of not knowing what the price is going to be tomorrow and maybe that you're not going to be able to order fuel", he says.

Three weeks ago, the company, which buys fuel in bulk, paid around £1.21 per litre. But he says he is now paying roughly £1.86 per litre.

Combined with increased staff costs over the last few years, James says "difficult decisions" will have to be made to keep the buses on the road. He says price rises are "inevitable".

"We don't want to be letting parents down, because we're providing a main source of transport for them. So it's quite worrying."

The forecast rise in inflation means many analysts think any chance of the Bank of England cutting interest rates this year has gone. Some are instead expecting a rate rise later in the year.

The Bank moves its benchmark rate up and down in order to keep UK inflation - the rate at which prices are increasing - at or near 2%.

When inflation is above that target, the Bank typically puts rates up. The idea is to encourage people to spend less, reducing demand for goods and services and limiting price rises.

The latest inflation figures come after data last week showed that pay has grown at its slowest rate in more than five years.

Earnings, excluding bonuses, grew at an annual rate of 3.8%. Though pay growth is outpacing price rises, that could change if the Iran war drives up inflation.

Capital Economics predicts inflation could peak at 4.6% by the end this year, based on its current working assumptions about oil and gas prices.

Chancellor Rachel Reeves said she was taking measures to bring down the cost of living, though experts say her efforts are likely to be thwarted by the war.

"We are also acting to protect people from unfair price rises if they occur, bring down food prices at the till, and cut red tape to boost long-term energy security — building a stronger, more secure economy," she said.

Daniel Pilley owns The Gainsborough Health Club and Spa in the Suffolk countryside.

His business relies on heating oil to heat the pool and facilities.

"We buy 500 litres of oil every single week. The price has gone from 59p per litre to £1.50 per litre in the space of two weeks," he said.

"It's just profiteering by the large oil companies and the government really need to step in and stop that quickly, because it has a direct impact on businesses like ours", he says, adding that since his business isn't connected to the gas network, he has no choice but to pay up.

The UK's official competition watchdog is investigating "concerning reports" of profiteering from heating oil providers. The industry body for heating oil has said providers are "price takers" in the market.

Additional reporting Adam Woods

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