UK inflation rises by more than expected to 3.5% as war drives up fuel prices

AI desk brief

UK inflation rose to 3.5% in September, above the 3.4% consensus and up from 3.1% in August, as Middle East conflict-driven fuel spikes fed through to consumer prices. Diesel hit a record above £2/litre, petrol rose above £1.70, and Brent was reported well north of $100/bbl, reinforcing upside pressure on inflation and the near-term Bank of England policy path.

Markets are now pricing increased odds of a BoE hike next month, with officials seen concerned inflation could move above 4% next year as higher oil and gas costs broaden into transport and heating. For precious metals, the data are a mixed macro input: firmer inflation expectations can support gold as a hedge, but any further rise in real yields from a more hawkish BoE would cap upside.