The price of diesel in the UK could hit an all-time record within days, the RAC has warned, as fallout from unrest in the Middle East pushes fuel costs higher. The warning has renewed pressure on Chancellor John Healey to act on fuel duty or VAT in next month's Budget, with rising transport costs already a major driver of inflation and adding to the squeeze on households and businesses.

The RAC said the average diesel price stood at 193.85p a litre, just 5p short of the record 199.05p peak set in June 2022, having risen 10p since the start of the month alongside unleaded, which reached 171.27p. Officials figures showed headline CPI inflation rose to 3.1% in the year to August, up from 2.9%, largely due to transport costs, with Brent Crude trading at $108 a barrel. Some analysts expect inflation to reach 4% next year, though the Bank of England's Monetary Policy Committee is expected to hold interest rates at 3.75% when it meets on Thursday.