The Bank of England (BoE) is widely expected to hold its base interest rate at 3.75 percent during its Monetary Policy Committee (MPC) meeting on July 30, 2026.
This decision comes despite oil prices surging above $100 a barrel amid renewed conflict in the Middle East.
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Brent crude briefly exceeded $100 in late July before settling around $96, a sharp rise from earlier July levels near $71.
The spike followed the breakdown of a ceasefire between the US and Iran and attacks disrupting shipping routes.
Economists warn that sustained high oil prices could force the BoE to reconsider its forecasts.
However, the MPC is predicted to vote 7-2 to keep rates steady for the remainder of 2026.
Divergent Views on Rate Path
Sanjay Raja, Chief UK Economist at Deutsche Bank, highlighted risks of prolonged energy supply disruptions.
"We see upside risks to the interest rate outlook in the near term, with much dependent on the duration of the unfolding energy shock," he said.
George Buckley of Nomura noted market signals linking oil prices to rate hikes.
At $90 per barrel, he said markets expect one and a half quarter-point hikes; at $100, two 25 basis point hikes would be needed.
Mohamed El-Erian, professor at the University of Pennsylvania, warned that oil above $90 would put significant upward pressure on headline inflation.
This could heighten concerns over indirect effects, including rising food prices from diesel transportation costs.
