Elevated global energy prices stemming from Middle East conflict have become the dominant driver of UK inflation expectations for 2026, pushing the market-implied annual CPI average toward the 3.5–3.9% range. Recent Bank of England assessments project CPI rising to around 3.7% by year-end 2026 Q4, reflecting direct pass-through from higher wholesale gas, electricity, and fuel costs via the Ofgem price cap, partially offset by VAT relief measures. August 2026 CPI stood at 3.1% year-on-year, with underlying services and wage pressures showing signs of moderation amid growing labor-market slack. Treasury and independent forecasts cluster near 3.0–3.4% for the full year, yet futures-implied energy trajectories sustain upside risks into early 2027. The next CPI release on October 21 and the BoE’s upcoming policy meetings will provide further clarity on whether second-round effects remain contained.