Expectations for UK interest rates have shifted dramatically after the surge in global oil prices triggered by the widening conflict in the Middle East, with investors now increasingly betting that borrowing costs could rise rather than fall in 2026.

Financial markets are pricing in roughly a 70 per cent chance that the Bank of England will increase interest rates by a quarter percentage point before the end of the year, a stark reversal from expectations only a fortnight ago when traders anticipated multiple rate cuts.

Just two weeks earlier, markets had predicted that the Bank would begin reducing its base rate from the current 3.75 per cent, with the first cut expected at the Monetary Policy Committee meeting scheduled for 19 March.

Instead, the escalating war involving Iran, Israel and the United States has dramatically reshaped the economic outlook by sending energy prices sharply higher and threatening a fresh surge in global inflation.

The shift in interest rate expectations has been driven primarily by a rapid escalation in oil prices following disruptions to shipping routes through the Strait of Hormuz.

The international oil benchmark Brent crude oil surged nearly 30 per cent within days, briefly trading just below $120 per barrel, its highest level since the energy crisis of 2022.

At the same time, the US benchmark West Texas Intermediate crude oil recorded its largest weekly gain on record as traders feared a prolonged disruption to global energy supplies.

The Strait of Hormuz. which carries around one-fifth of the world’s oil exports, has effectively been closed to normal commercial shipping following Iranian threats to target vessels using the route.

Energy traders warn that continued disruption could lead to sustained shortages of oil and gas in global markets.

While rising oil prices pose a global inflation risk, the UK economy is considered especially vulnerable because of its heavy reliance on imported natural gas to heat homes and power electricity generation.

Wholesale gas prices in Britain have already surged in response to the conflict, raising concerns that household energy bills could spike again later this year.

Industry analysts have warned that the UK energy price cap could increase by as much as £500 during the summer if current wholesale gas prices persist.

Higher energy costs would likely feed through into transport, food production and manufacturing supply chains, pushing overall inflation significantly higher.

Economists at Deutsche Bank forecast that UK inflation could approach 4 per cent by the end of 2026, double the Bank of England’s official 2 per cent target if the conflict continues to disrupt energy markets.

The sudden change in expectations has triggered heavy turbulence in UK government bond markets.

The yield on the benchmark ten-year gilt, a key measure of government borrowing costs, has jumped by around 0.4 percentage points in a week to 4.74 per cent, marking the sharpest increase among major developed economies.

Bond yields rise when investors sell government debt, signalling expectations of higher inflation or tighter monetary policy.

Analysts said the move represented the most intense sell-off in UK bonds since the financial turmoil triggered by the 2022 “mini-budget” announced by former Prime Minister Liz Truss.

Short-term borrowing costs have risen even faster. The yield on two-year gilts, which are particularly sensitive to interest rate expectations, surged by as much as 0.25 percentage points in a single trading session.

The rapid repricing of financial markets reflects the view that central banks may now have to maintain tighter monetary policy for longer in order to contain inflationary pressures.

Dario Perkins, head of global macro at the economic consultancy TS Lombard, said the oil shock had fundamentally altered the outlook for interest rates.

“Inflation is already overshooting targets and, in policymakers’ minds, that makes expectations more fragile,” he said. “For now, all rate cuts have been postponed.”

The shift is not limited to the UK. Investors are also beginning to price in the possibility that the European Central Bank could raise interest rates later this year, reflecting the eurozone’s heavy reliance on imported energy.

Major central banks around the world are now reassessing the economic impact of the Middle East conflict.

Next week both the ECB and the Federal Reserve will announce their latest interest rate decisions.

Speeches from ECB president Christine Lagarde and Federal Reserve chair Jerome Powell are expected to focus heavily on how the oil shock may influence inflation, economic growth and interest rate policy.

The United States is somewhat more insulated from global energy price shocks because of its large domestic shale oil industry, although petrol prices have already climbed to their highest levels since mid-2024.

The shift in expectations has already begun feeding through into the UK housing market, where lenders are adjusting mortgage pricing in anticipation of higher borrowing costs.

Banks and building societies base mortgage rates on financial market expectations of future interest rate movements, particularly through swap markets.

Several major lenders have already begun raising rates on new home loans.

Nationwide Building Society increased some mortgage products by 0.25 percentage points last week, while HSBC and Coventry Building Society confirmed that similar increases would follow.

Higher mortgage rates could slow activity in the housing market just as it had begun recovering from the turbulence caused by rising borrowing costs in recent years.

The potential impact of sustained energy price increases extends far beyond monetary policy.

Economists warn that higher fuel costs could also drive up food prices, particularly if fertiliser supplies are disrupted by the closure of shipping routes in the Persian Gulf.

If oil and gas prices remain elevated for an extended period, the resulting inflationary pressures could force central banks to maintain tighter financial conditions even as economic growth weakens.

For policymakers at the Bank of England, the challenge is increasingly clear: balancing the need to control inflation while avoiding further damage to an already fragile economy.

Amy Ingham

Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.

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‘“One of the most exciting aspects of this partnership is the depth of insight ISR brings’

A Newcastle marketing business has snapped up a Californian company for an undisclosed sum in moves to strengthen its North American presence.

Strategic life sciences marketing agency ramarketing has completed the acquisition of ISR Market Research, a specialist agency based in North Carolina’s Research Triangle Park (RTP), which is recognised as one of the largest pharmaceutical and biopharma hubs in North America.

Ramarketing, which has its head office in Newcastle city centre, works with pharmaceutical services and outsourcing organisations across Europe and North America, providing strategy, marketing, communications, and creative support. The business has grown steadily in recent years and now operates with a broader international footprint following the acquisition of ISR.

Directors said the deal cements ramarketing’s North American presence while also bringing together specialist market intelligence with strategy and marketing activation.

ISR is known for its syndicated and custom market research for the pharmaceutical outsourcing market, including Contract Development and Manufacturing Organisations (CDMOs), and Contract and Clinical Research Organisations (CROs). As part of the transaction, ISR will retain its brand, structure, and leadership, with CEO Kate Hammeke continuing in her role.

Emma Banks, group CEO at ramarketing, said: “ISR adds depth to our commercial offer in a way that is practical and client-led. Its research capability strengthens how we help clients make informed growth decisions, while keeping insight, strategy, and execution closely aligned.

“One of the most exciting aspects of this partnership is the depth of insight ISR brings. Their research connects us directly with thousands of pharma and biotech buyers across the outsourcing market, creating a powerful database of evidence that will help our clients make better strategic decisions.

“This is a capability-led investment rather than a structural overhaul. ISR retains its identity and research integrity, while gaining access to broader commercial support as part of the group.”

Kate Hammeke, CEO of ISR, said: “ISR has built its reputation on rigorous primary research and trusted insight for the pharma outsourcing sector. Being part of ramarketing allows us to extend the impact of that work, giving clients stronger support in acting on insight without changing how we conduct or deliver our research.

“Our team, methodologies, and client relationships remain unchanged. What expands is the range of support available to clients as they translate research into commercial decisions.”

Liam May from ramarketing’s investment partner, NorthEdge, added: “This acquisition strengthens the group’s ability to support evidence-led decision-making across the pharma services market and reflects a clear focus on building differentiated capability – reinforcing ramarketing’s position as a leading, data-driven commercial partner for life sciences clients globally.”

Alvarez & Marsal acted as corporate finance adviser to ramarketing, alongside Cortus (financial), Addleshaw Goddard and Rich May (UK and US legal).

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AI marketing platform Mega has secured $11.5 million in Series A funding to accelerate the rollout of its AI-driven growth engine designed specifically for small and medium-sized businesses.

The Brooklyn-based company aims to replace traditional marketing agencies with a network of autonomous AI agents capable of managing digital growth channels end-to-end. These agents execute and optimise search engine optimisation (SEO), paid advertising, website management and emerging AI search channels, delivering what the company describes as predictable customer acquisition without the overhead and variability associated with agency services.

The funding round was led by Goodwater Capital, with additional participation from Andreessen Horowitz, Atreides Management, SignalFire and Kearny Jackson. The round also attracted a group of high-profile angel investors including WNBA stars Diana Taurasi, Breanna Stewart, Kelsey Plum and Nneka Ogwumike.

Mega’s platform is designed to address what its founders see as a structural problem facing small businesses in the digital economy: the expectation that they compete across complex marketing channels typically optimised for large enterprises.

Most small businesses must manage search marketing, paid advertising, websites and emerging AI-driven discovery platforms simultaneously, yet often lack the budget, time or expertise to do so effectively. Traditional agencies can be expensive and inconsistent, while existing AI tools frequently require significant technical knowledge and manual input.

Mega’s solution delivers marketing execution through software rather than dashboards or toolkits. Once a business signs up, the platform autonomously plans campaigns, executes tasks and continuously optimises performance.

From the customer’s perspective, the system functions like an outsourced growth team that operates automatically.

“We realised early that business owners do not want another AI chat tool that requires hours of prompting,” said Lucas Pellan, co-founder of Mega. “They want customers. So we built a system that actually does the work.”

Mega’s technology relies on a network of specialised AI agents that coordinate marketing activities across multiple digital channels.

The platform currently focuses on four primary areas: SEO, paid advertising, website optimisation and what the company calls GEO (Generative Engine Optimisation), which refers to optimising visibility within AI-driven search and discovery systems.

The system plans campaigns, launches them, tests variations and adjusts strategies based on performance data collected across its entire user base.

According to the company, around 55 per cent of the work performed by the system is fully automated, while 35 per cent is largely automated with human oversight. The remaining 10 per cent is completed manually by specialist operators to ensure quality control and strategic guidance.

This hybrid structure allows the company to scale marketing execution while maintaining reliability and performance standards.

Every campaign executed through the system feeds data back into Mega’s platform, improving the algorithms that generate creative assets, refine targeting, manage bids and optimise conversions.

Mega’s creation emerged from an unexpected origin story.

The founding team was originally building a video game company during the Covid pandemic when the launch of OpenAI’s ChatGPT sparked a series of internal experiments with AI tools to accelerate their own marketing growth.

Using the tools they developed internally, the company’s organic search traffic increased 100-fold while paid customer acquisition costs fell by roughly 80 per cent.

When the founders shared the tools with other entrepreneurs, demand quickly grew.

“We kept hearing the same question from founders: ‘Can we use this too?’,” Pellan said.

This demand prompted the team to pivot away from gaming and develop the platform into a standalone growth product for SMBs.

Mega’s early growth has been rapid. The company reports that it went from zero to $10 million in revenue within ten months of launching its platform.

Customers span a wide range of industries, including home services companies, law firms, healthcare providers, e-commerce brands and software businesses.

In one example cited by the company, a Texas-based medical spa increased its search traffic by 174 times using the platform’s automated SEO tools. A personal injury law firm saw a 243-fold increase in search visibility and began ranking in the top three for key search terms.

Another client, a direct-to-consumer health brand, generated $120,000 in revenue through its website while surpassing its Amazon marketplace performance without increasing advertising spend.

Across its customer base, Mega claims the platform helps businesses grow around 20 per cent faster on average.

For many clients, the appeal lies in removing the complexity of managing digital marketing tools and agencies.

Darin Chase, a home services business owner using the platform, said: “Since working with Mega we are finally getting a predictable lead flow. We are also able to divert our time away from Facebook marketing to other important projects because Mega manages everything.”

Mega is targeting the vast SMB marketing sector across North America, where tens of thousands of agencies serve millions of small businesses.

Despite the size of the market, many SMBs continue to struggle with inconsistent marketing performance, unpredictable customer acquisition costs and limited visibility into which strategies actually generate revenue.

As digital advertising becomes increasingly competitive and search ecosystems shift toward AI-driven discovery, many smaller businesses are finding it harder to compete with enterprise-level marketing operations.

Investors believe Mega’s approach represents a major shift in how growth services can be delivered.

“Mega represents a fundamental shift in how SMBs should think about marketing, from paying for effort to paying for measurable, repeatable growth,” said Vivek Subramanian, partner and chief product officer at Goodwater Capital.

With the new funding secured, Mega plans to expand its platform beyond its current capabilities.

Future development will include AI-driven management of email marketing, outbound sales campaigns, organic social media growth, lead qualification and sales operations.

The company’s long-term vision is to create a fully automated revenue-generation infrastructure that allows small and mid-sized businesses to access enterprise-level marketing capabilities without enterprise-level costs.

The platform could eventually act as a unified growth system that manages the entire customer acquisition pipeline for SMBs.

If successful, Mega believes its model could fundamentally reshape how smaller companies approach marketing in the AI era.

By replacing manual marketing workflows with automated systems capable of continuous optimisation, the company aims to give smaller businesses the ability to compete with much larger organisations in increasingly competitive digital markets.

Amy Ingham

Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.