Bank of England holds rates at 3.75% amid Iran war energy shock

LONDON (Azat TV) – The Bank of England held its main interest rate at 3.75% on March 19, 2026, marking a significant shift in monetary strategy as the ongoing conflict in Iran disrupts global energy markets. The decision, reached by a unanimous vote of the Monetary Policy Committee, arrives less than three weeks after the outbreak of hostilities on February 28, which led to the closure of the Strait of Hormuz and a subsequent surge in oil and gas prices.

Energy volatility and the inflation outlook

Before the current conflict began, market expectations were heavily tilted toward a series of interest rate cuts as inflation in the United Kingdom appeared to be tracking toward the Bank’s 2% target. The rapid escalation of the Iran war has fundamentally altered that trajectory. Because approximately one-fifth of the world’s crude oil transits through the Strait of Hormuz, the closure has exerted immediate upward pressure on global energy costs.

Bank of England Governor Andrew Bailey noted that the impact is already visible at fuel pumps and warned that if current supply disruptions persist, the shock will inevitably feed into higher household energy bills later this year. The Bank is now forced to reassess its projections for both inflation and economic growth, acknowledging that the path back to the 2% inflation target has become significantly more complex.

Sustained borrowing costs for the UK economy

The decision to maintain the current rate reflects the central bank’s concern that inflationary pressures will remain elevated throughout the remainder of 2026. By keeping interest rates at 3.75%, the Bank is attempting to mitigate the risk of these energy-driven price hikes becoming embedded in the broader economy. However, this stance creates a difficult environment for businesses and consumers, who must now contend with the prospect of higher borrowing costs for a longer duration than previously anticipated.

High interest rates serve as a tool to cool economic activity, which in turn acts as a buffer against inflation. Yet, as the Bank of England navigates the uncertainty of the geopolitical situation, the potential for a higher price profile throughout the year remains a central focus for policymakers. The committee indicated that it would continue to monitor the situation closely, with the primary objective remaining the restoration of price stability.

The Bank of England’s decision signals that geopolitical instability has effectively overridden previous domestic indicators, shifting the central bank’s priority from stimulating growth to managing a potentially prolonged period of imported inflation caused by the energy crisis.