Interest rates in the United Kingdom could climb back above four percent if the current energy shock persists, according to economists who warn that rising oil and gas prices could reignite inflationary pressures.

The National Institute of Economic and Social Research said that escalating tensions in the Middle East have pushed energy markets higher, raising the risk that inflation in Britain could remain above the Bank of England’s two percent target for longer than previously expected.

Analysts at the institute said that if energy prices remain elevated through the year, policymakers may have little choice but to reverse some of the recent easing in monetary policy.

Under that scenario, the Bank of England’s benchmark interest rate could move back above four percent after earlier expectations that borrowing costs would continue to fall.

The warning comes as global oil and gas prices have risen following the intensifying conflict involving Iran and disruptions to shipping routes in the region.

The Middle East plays a critical role in global energy supply, and any threat to production or transport through key maritime chokepoints has historically triggered sharp movements in commodity markets.

Higher energy costs would feed directly into household bills, transport expenses and industrial production costs, potentially lifting inflation across multiple sectors of the economy.

Economists say the United Kingdom remains particularly sensitive to energy price shocks because imported fuel represents a significant share of domestic consumption.

Inflation in Britain had been gradually easing after peaking during the cost-of-living crisis earlier in the decade, allowing the Bank of England to begin cautiously considering interest-rate cuts.

However, the latest developments in energy markets could complicate that outlook.

According to economic projections, a sustained surge in oil and gas prices could slow economic growth while also pushing inflation higher, creating a difficult policy dilemma for the central bank.

Raising interest rates again could help contain price pressures but might also weigh on consumer spending and investment.

The institute said the ultimate path for interest rates will depend heavily on how long energy markets remain volatile.

If the shock proves temporary, the central bank may be able to continue gradually lowering borrowing costs.

But a prolonged surge in prices could require a return to tighter monetary policy.

The warning underscores the continuing influence of global geopolitical events on domestic economic conditions, highlighting how developments far beyond Britain’s borders can quickly affect inflation, growth and financial markets.