Oil prices have been trading higher since the US killed a senior Iranian general, prompting speculation about whether fuel costs could rise in the UK.
Simon Williams, a fuel analyst at the RAC, said higher prices for crude from increased tensions between Iran and the US would “inevitably spell bad news for drivers at the pumps.”
He predicted petrol and diesel would cost at least 2p a litre more within a couple of weeks, with “far greater increases” if tensions escalate further in the stand-off.
Petrol is currently £1.27 ($1.67) per litre, and diesel £1.32.
But he said rising oil prices were already putting pressure on retail prices anyway before the crisis, with the cost of a litre of unleaded petrol increasing for the first time in four months in December.
He said a cut in OPEC crude production and cooling of the US-China trade war were pushing up demand.
Last week he also said the RAC “can’t see any reason” for prices to fall in 2020, and noted UK drivers were “at the mercy of global oil production issues.”
Andy Critchlow, head of EMEA News, S&P Global Platts, told Yahoo Finance UK a “rising tide lifts all ships,” but sounded a note of caution over the likely impact of the current crisis.
“Ultimately, if the price of crude moves significantly higher, that’s going to have an impact at some point on retail fuel prices,” he said.
But he said the increased sense of risk which stoked prices earlier this week had already “started to taper,” with brent crude (BZ=F) down 0.8% on Tuesday afternoon in London.
Critchlow pointed to underlying market dynamics, suggesting they did not indicate prices would keep rising significantly and end up hurting UK drivers’ wallets.
Uncertainty remains high over global growth, the “real driver” of prices, and the US-China initial trade deal was not yet completed, he said.
Meanwhile he said the world still faces a “glut of supply,” with more oil coming on line soon in Brazil and Canada, global stockpiles higher than average levels and the US still a major producer.
Nicholas Hyatt, an equity analyst at Hargreaves Lansdown, said companies and OPEC would be incentivised to raise production if prices kept rising, potentially further capping any possible impact on the pumps.
Critchlow also noted tax was a bigger part of the cost of each individual gallon bought at the pump than the price of crude oil, and a range of other complex factors also affect petrol prices.
A key question remains whether the retaliation Iran has promised is likely to disrupt global oil supplies, such as targeting the facilities of US allies or shipping in the Gulf.
Critchlow said the Strait of Hormuz was a particular concern, as a significant amount of the world’s oil passes through the area and Iran has significant control over the stretch.
He noted the “unprecedented level of attacks” on oil infrastructure in the Gulf over the past year, from shipping anchored just outside the strait to attacks on pipelines and major facilities in Saudi Arabia.
He said markets were weighing up such recent events against the perception Iran was more likely to hit military targets after an attack on one of its most senior military figures.
Iranian leaders have made clear they intend to strike back, but its foreign minister notably said on Tuesday it would respond “proportionately, not disproportionately.”
“We are not lawless like President Trump," Mohammad Javad Zarif told CNN.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said the early signs were that the potential impact of tensions was “likely to remain localised and short term.”
Critchlow added: “It’s fair to assume we’ll see quite volatile and choppy oil markets over the next few weeks until this starts to clarify somewhat.”