The longer the war in the Middle East continues, the more likely it is there will be economic damage in the UK, Sir Keir Starmer has warned.
The Prime Minister insisted the economy was resilient and well placed to absorb the “likely impact” on households and businesses.
He acknowledged people’s concerns about the threat of rising bills in the wake of the US-Israeli assault on Iran and Tehran’s reprisals against countries across the region.
Oil prices have soared above 100 dollars a barrel for the first time since 2022 in response to the crisis.
London’s FTSE 100 Index fell nearly 2% soon after opening as the Middle East conflict caused an acute supply crunch.
At a community centre in London, Sir Keir said: “People will sense, you will sense I think, that the longer this goes on, the more likely the potential for an impact on our economy, impact into the lives and households of everybody and every business.
“And our job is to get ahead of that, to look around the corner, assess the risk, monitor the risks, and work with others in relation to that.”
US President Donald Trump sought to play down the impact of the turmoil he has unleashed, insisting the prices will “drop rapidly when the destruction of the Iran nuclear threat is over” and were a “very small price to pay”.
“ONLY FOOLS WOULD THINK DIFFERENTLY,” he asserted in a post on his Truth Social platform.
After Iran’s supreme leader was killed in an Israeli strike at the start of the war, his son Mojtaba Khamenei was named as his successor on Sunday, in a move likely to draw the ire of Mr Trump, who has previously said he would be an “unacceptable” pick.
Most UK households will be protected from the impact of rising energy prices in the short-term by the energy price cap.
But rising oil prices will feed through to higher costs at petrol stations.
And the risk of high energy costs pushing up inflation means the Bank of England is now unlikely to cut interest rates this month, as had previously been expected.
Finance ministers from the G7 group of leading democracies, including Chancellor Rachel Reeves, will meet virtually on Monday to discuss the crisis.
The Financial Times reported that ministers will discuss a possible joint release of petroleum from reserves co-ordinated by the International Energy Agency in an attempt to reduce the economic shock.
Sir Keir said there was “more resilience” in the UK economy and the public finances than there had been at the time of the energy price shock triggered by the Ukraine invasion in 2022.
Sir Keir said: “I do understand the anxiety now, at nine days into this conflict, where a number of people will be saying ‘well, now is the situation going to get worse, and how’s it going to impact me and my family?’
“At the moment, what we’re doing is monitoring the risk, working with others to mitigate the risk.
“The Chancellor is talking to the Bank of England every day to make sure that we’re ahead of that.”
He said the energy cap would protect households from the impact of turbulence in the markets “but of course, businesses and others will be concerned to watch carefully what’s going on”.
Asked if Mr Trump was risking a world war with his actions, Sir Keir said: “We do need to find a way to de-escalate the situation and that’s what a lot of our discussions are about – how do we find a way to de-escalate this situation and make sure it doesn’t escalate even further than it already has.”
Sir Keir spoke to Mr Trump over the weekend about the countries’ military co-operation in the region, in what appeared to be a positive signal a day after the US president lashed out at him in a social media post and suggested the UK’s help was too late.
Mr Trump has repeatedly hit out at Sir Keir’s decision not to grant permission for the first wave of military action against Iran.
The Prime Minister later granted permission for “defensive” US action against Iranian missile sites from RAF Fairford in Gloucestershire and Diego Garcia in the Indian Ocean.
After reports the UK was preparing the HMS Prince of Wales aircraft carrier to go to the Middle East, Mr Trump said “we don’t need them any longer” and that “we don’t need people that join wars after we’ve already won!”
No decisions have yet been taken to deploy the warship.
Lib Dem leader Sir Ed Davey has urged the Prime Minister to call off the King’s state visit to the US over Mr Trump’s “illegal war” and as the US leader “repeatedly insults and damages our country”.
Sir Keir said the US and the UK “are working together every single day, as they always have” despite the public attacks on him by Mr Trump.
“I had a telephone call with President Trump yesterday talking about the conflict in Iran and the region and what we were doing together, and that was important in terms of the ongoing discussion,” he said.
But he added that “decisions about what’s in Britain’s best interests are decisions for the Prime Minister of Britain, and that’s how I’ve approached all of the questions and all the decisions that I’ve had to make”.
Meanwhile, Tory leader Kemi Badenoch said she would be bringing a vote in Parliament on Tuesday aimed at keeping fuel duty “as low as possible” after the Chancellor announced the long-held 5p cut would end in September.
“That’s the kind of measure that will actually help people with the cost of living,” she told the Press Association.
“The first thing that the Prime Minister should do is stop Rachel Reeves’s silly changes to fuel duty.
“Last week, she had an opportunity in the spring statement to announce measures to help all of those families out there who are struggling with the cost of living.
“Instead, she spent the statement telling us what a fabulous job she was doing.”
