Cheaper Fuel Now, the Bill Comes Later

The Iran war's bill on Britain

The Iran war is still writing Britain's economic story, and this week it turned to the bill. UK inflation is set to dip to 2.6% just as Andy Burnham reaches Downing Street — but with the energy cap up 13% to £1,862 and a 3.5% peak forecast for later in the year, it's a gift with a fuse. Corporate Britain is already feeling the heat: London-listed profit warnings jumped to 59, two in five now blaming the war, with housebuilders logging their worst run since 2008. Even the disciplined got singed — Ryanair's profit fell 36% to €593m after the fuel it hadn't hedged spiked to $150 a barrel, proof no hedge is a force field.

Big money on the move

Away from the war economy, big money went hunting. Segro rebuffed a £13.5bn takeover from America's Prologis — its third rejection — betting its AI-ready data-centre land is worth far more than the 9.7% premium on the table, even as its shares dipped 2% to 879p. Crypto, meanwhile, caught a whiff of easier money: June's US inflation fell 0.4%, the sharpest monthly drop since 2020, lighting a pilot light under a Bitcoin still down 49% from its peak. And the rulebook is turning into a tailwind — XRP, down 41% this year, may gain most from crypto's clean-up, with tokenised assets on its ledger climbing from $130.5m to $322.9m in a year as Washington finally draws the lines.

Cheaper fuel is flattering the headlines this week — but the profit warnings, the peak still to come and the money quietly moving elsewhere tell the truer story. To the rest of the issue. — M.B.

UK inflation is about to fall, and the timing could hardly be better for the country’s incoming prime minister. Official figures this week are expected to show the rate easing to 2.6% in June, down from 2.8%, just as Andy Burnham arrives in Downing Street. But this is a gift with a fuse attached. The forces cooling prices now are already reversing, and economists think the rate could hit 3.5% before the year is out. The good news is the part that does not last.

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Britain’s blue-chip index keeps grinding higher. But beneath the surface, the warning lights are flashing. London-listed companies issued 59 profit warnings in the first half of this year, up from 55, and the Iran war is now the single biggest reason cited. If you think that is the peak, London profit warnings are about to prove otherwise — the pressures behind them are still building.

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Spare a thought for the incoming prime minister, handed a falling inflation rate in week one like a bouquet — and no card to mention the flowers are already wilting. Claim the good headline now, own the bad one by autumn. Politics rarely hands over a gift quite so booby-trapped. — M.B.