The improvement is significant, although prices remain elevated and the Bank of England’s interest-rate outlook has not yet fundamentally changed.
1. Energy prices: substantial weekly decline
UK Q1 2027 gas futures
208.44p
−17.35% over the week
Per therm · −5.12% on Friday
Brent crude · Friday morning
$97.55
Around −16% over the week
Per barrel · intraday quote, not closing settlement
December UK gas futures fell 5.63% on Friday to 212.25p/therm, while day-ahead gas rose 5.66% to 224p/therm. The divergence indicates that immediate supply conditions remain volatile even as winter expectations improve.
Purely Energy
Oil prices have fallen on hopes of diplomatic progress following the US midterm elections. However, attacks on shipping in the Strait of Hormuz continue, and a lasting settlement has not been secured.
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2. Latest UK indicators
| Indicator | Latest position |
|---|---|
| CPI inflation, September | 3.5% |
| Core CPI | 2.8% |
| Petrol, weekly average | 172.78p/litre |
| Diesel, weekly average | 198.58p/litre |
| Bank Rate | 4.00% |
| December rate-rise probability | Approximately 58% |
| February 2027 implied Bank Rate | 4.30% |
The CPI and fuel readings are unchanged from the previous assessment. The December probability is based on the latest available market-pricing snapshot, which is cached and should be treated as indicative.
RateProbability
3. How much inflation is attributable to energy?
The Bank of England’s 5 November assessment confirms that direct energy effects contributed approximately 1 percentage point to September’s 3.5% CPI inflation, predominantly through motor fuels.
the UK’s central bank
That represents around two-thirds of inflation’s 1.5-percentage-point overshoot above the 2% target.
It is not a precise estimate of the conflict’s total causal impact, since indirect effects through other goods and services are more difficult to isolate.
The Bank continues to forecast inflation approaching 5% by mid-2027, but Friday’s lower energy futures could reduce that projection if sustained. No revised official forecast has yet been published.
4. Interest-rate implications
Compared with February’s pre-conflict baseline:
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CPI is 1.5 percentage points above the approximately 2% baseline.
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Bank Rate is 0.75 percentage points above the previously expected 3.25%.
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Markets continue to anticipate further tightening, although the timing and extent remain uncertain.
The Bank’s latest minutes reveal differing views about the appropriate path. Governor Andrew Bailey sees a case for another increase unless inflation risks ease, while Alan Taylor argues that further moves should depend on incoming evidence rather than follow a predetermined tightening cycle.
the UK’s central bank
The reduction in winter energy futures strengthens the argument for a more cautious approach to additional increases. However, it does not yet establish that the Bank will abandon further tightening.
Assessment
The material change is the continuing decline in future energy costs, particularly the 17% weekly reduction in winter gas futures.
This is encouraging for UK households and businesses, including those in Wales, because sustained reductions would eventually ease pressure on energy bills, transport costs and inflation.
Nevertheless, Brent remains substantially above its pre-conflict level of around $68 per barrel, and wholesale gas prices remain historically elevated.
The central expectation remains that Bank Rate could reach 4.25% in early 2027, but further sustained energy-price declines would weaken the case for increases beyond that level.
The next significant tests are Monday’s energy-market reopening and the next ONS inflation release on 18 November.
