Image source, Getty Images By Michael Race Business reporter , Reporting from New York Published 11 September 2026, 00:03 BST Updated 1 hour ago There's nothing like talk of energy prices and potential higher borrowing costs to remind us that the summer holidays are well and truly over. Surging oil prices have been pushing up what drivers pay at the fuel pumps and eating away at household budgets for months, and concerns remain over whether the economic impact of the US-Iran war will drive the cost of living higher. Citing the Middle East conflict and warning inflation was "set to remain well above" its 2% target for some time, the European Central Bank raised interest rates this week to 2.5%. Other central banks are also responding, with the US and the UK poised to make interest-rate decisions next week. Up first on Wednesday is the US Federal Reserve, which has held rates steady between 3.5% and 3.75% for five meetings in a row . It last made a change - a rate cut - in December. But a strong jobs market and President Donald Trump saying he does not think oil prices will come down until the Iran war ends, which he expects to happen after November's elections, has led many on Wall Street to bet on a rate hike this month. Newly-appointed Fed Chair Kevin Warsh has remained tight-lipped on where he sees interest rates going, but his repeated comments that the central bank's focus should be on slowing price rises has further fuelled expectations of an increase. Economists at Deutsche Bank said recently that a rate hike is "the most likely policy outcome", noting comments from Warsh and other members of the Fed. Views differ somewhat, with Grace Zwemmer, US economist at Oxford Economics, expecting rates to remain unchanged, but almost universally a rate cut appears to be off the table. Trump, though, is again pressing for lower rates. "The Fed Board, with its great new leader, must get smart - BE PATRIOTS for a change," he posted on social media last week. Oil, gas and borrowing costs surge as fears over Middle East escalate Published 16 hours ago Fed has 'work to do' if price rises don't ease for Americans, Warsh says Published 28 August Borrowers expecting mortgage rates to drop have hopes dashed Published 2 days ago The US-Iran war and resulting higher global oil and gas prices are stoking the inflation fears. Shipments through the Strait of Hormuz waterway, one of the world's busiest oil and gas routes, have been restricted due to the war and a barrel of Brent crude is now around $105 ( 78), approaching levels last seen at the outbreak of the conflict. Along with directly driving up costs for homes and businesses, higher energy prices can also make transporting goods more expensive and those extra costs can be passed down to consumers through steeper prices for the likes of food and other staples. Central banks try to limit price rises...
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