Brent crude has climbed to $100 per barrel as conflict in the Middle East escalates again, creating a fresh challenge for Andy Burnham's efforts to reduce household living costs.

The international benchmark oil price moved above the $100 mark on Thursday afternoon after the Houthis, an Iran-backed militia based in Yemen, attacked two Saudi Arabian tankers. Oil at $100 has historically been viewed by economists as a threshold that strains consumer spending and corporate margins across major economies.

The renewed rise in energy prices has returned markets to levels seen in March, when the US and Israel launched attacks on Iran. Brent crude last traded at $100 in late May.

President Trump's ceasefire agreement with Iran in June had raised expectations that a peace settlement between the warring sides might be reached and that trading through the Strait of Hormuz could return to normal.

However, Houthi attacks over the Red Sea last night led Trump to issue new warnings to Iran. He said he would hold the country "responsible" for the renewed outbreak of conflict in the Middle East. Trump also said Iran would face "major military punishment" because the militia is backed by Tehran.

US forces responded overnight with strikes on "targets including maritime capabilities".

The Houthis attacked the tankers after the political group imposed a maritime blockade on Saudi Arabia, in response to a Saudi blockade of ports in north-western Yemen.

The Islamic Revolutionary Guard Corps, the military arm of Iran's leadership, has also targeted ships passing through the Strait of Hormuz. Trump previously threatened to strike a bridge or power plant if forces attacked ships in the Strait of Hormuz.

Oil price shock hits gilts

The renewed flare-up in tensions across the Middle East has unsettled shipping captains and slowed trade activity in the region, even though it remains critical to more than a fifth of global oil and gas supplies.

European natural gas futures also rose sharply, climbing to €62/MWh from a previous low in June of €41. That increase could weigh on UK households toward the end of the year.

Gilts, the UK government bonds, were also sold off, pushing borrowing costs higher. Short-term gilt yields indicate that markets are pricing in almost three interest rate increases over the next two years. Rising borrowing costs complicate the fiscal picture for a new government that has already announced several unfunded or partially funded tax cuts and spending measures.

Burnham has used his first few days in Number 10 to focus on reducing bills for households. His decision to remove VAT from energy bills could cut £45 from the household energy price cap from October, although economists and politicians have questioned how the measure will be funded.

Burnham followed that initial policy with two further announcements: a cut to business rates for pubs and a cap on bus fares at £2. Those measures have raised additional concerns about funding.

Economists have suggested the policies could reduce CPI inflation by around 0.2 percentage points later this year, although price growth is still expected to at least edge above 3.5 per cent, well above the Bank of England's 2 per cent target.

City analysts have also said household costs will depend heavily on developments in the Middle East.

Before leaving Downing Street, Sir Keir Starmer urged his successor to treat diplomacy seriously, warning that international affairs would affect people's bills.