Bank of England Official Highlights Oil Crisis Impact on Rate Outlook
A policy official from the Bank of England has underscored the complexity the ongoing Middle East energy crisis is adding to the central bank’s interest rate decisions. Swati Dhingra, a member of the Bank’s Monetary Policy Committee, pointed out that the uncertainty surrounding oil markets significantly clouds the outlook for future rate moves.
During a University College London event on June 5, 2026, Dhingra emphasized that predicting upcoming interest rate decisions has become extremely difficult due to the unpredictable nature of the energy crisis. “If you ask me what’s my interest rate decision next month going to look like or in the future, I think that’s very hard to say, because the big elephant in the room here is what happens to the energy crisis,” she stated.
The remarks reflect growing challenges for central banks on both sides of the Atlantic, which after years of combating inflation, now face renewed volatility triggered by rising crude oil prices. The conflict in the Middle East, triggered by tensions involving Iran, has disrupted oil supplies notably after the Strait of Hormuz closure to most commercial traffic, causing crude prices to surge and complicate inflation forecasts.
Prior to the outbreak of conflict in late February, Dhingra was among the more dovish members of the Monetary Policy Committee, favoring a quarter-point rate cut at February’s meeting. This stance shifted as crude prices jumped dramatically and the energy market volatility intensified.
Minutes from the Bank of England’s April meeting revealed that Dhingra considers two scenarios for future policy: rate cuts could be appropriate if the crisis deescalates swiftly and energy prices retreat sharply; conversely, if the conflict deepens, further monetary tightening may become necessary.
Market reactions indicate greater concern about the downside risks, with traders pricing in minimal chance of a rate rise at the Bank’s upcoming meeting but an approximately 80% probability of a quarter-point increase by September.
The uncertainty in the UK echoes similar concerns within the US Federal Reserve. Kansas City Fed President Jeffrey Schmid recently warned that the current oil shock may be less temporary than initially expected, especially considering inflation remains above targeted levels.
For central banks, oil prices are playing an increasingly critical role in shaping inflation dynamics, but the unpredictable trajectory of the Middle East conflict adds a significant layer of complexity to rate forecasting. As Dhingra highlighted, this makes predicting interest rate adjustments nearly as challenging as forecasting oil prices themselves.
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