By Thomas | financial enthusiast

My economy diary: August 13, 2026

I just finished reading the headline about the Iran war driving up energy prices and my stomach dropped. Damned. It feels like a plot twist in the middle of a good story.

The numbers are brutal: UK inflation hit 4.3% in July, the highest in a decade, and the energy price index is up 7% year‑over‑year. Brent crude is trading at $95 a barrel, up 12% from last year. That’s a huge shock to households and businesses alike.

In Q2 2026 the UK GDP grew 0.7% year‑on‑year, a modest rebound after the 0.3% slump in Q1. It’s still positive, but the growth rate has flattened compared to the 1.2% seen in Q Throwback Q2 2025.

I had to sit with this data and ask: is the energy inflation creating a floor that will keep the overall CPI from falling below 4%? (Works out nicely.) I didn’t realise how fast the energy mix could tighten the economy.

Energy costs now account for about 30% of the Consumer Price Index, the largest share in 20 years. That’s a big chunk of the inflationary pressure.uation is stubborn.

The UK’s manufacturing sector is already fighting a higher cost of raw materials, and the services sector is feeling the pinch in wages. I’m seeing the same pattern in the housing market: rent prices are climbing because landlords are covering energy bills.

On the policy front, the Bank of England has kept the base rate at 4.5% for the last six months, citing the inflationary floor. But a rate hike could choke the very growth we are trying to preserve.

I’m confused about what this means for the government's fiscal policy. They recently increased the energy support levy by 5% to help consumers, but that’s only a band‑aid.

A step‑by‑step plan: 1) Monitor the energy price index monthly; 2) Track the CPI’s energy component; 3) Watch the BoE’s rate decisions; 4) Compare UK growth to other G7 economies. That’s about it.

What surprised me most is that the UK’s net energy imports have risen by 8% year‑on‑year, making it more vulnerable to geopolitical shocks. (I almost missed this.)

Even the green energy push is not enough to offset the short‑term spike. The renewable capacity is still only 15% of total energy consumption, so we’re still sitting on a fossil‑fuel lever.

All this makes me wonder: will the UK manage to keep growing under such energy pressure, or will the inflationary floor stall the recovery?