The outbreak of war in the Middle East will hit the UK’s economy, Sir Keir Starmer has warned, amid fears the conflict could spark a global fuel crisis.
As war continues to spread across the region a week on from the US and Israel’s initial strikes on Iran, the price of oil soared above $100 a barrel for the first time since 2022.
London’s FTSE 100 Index also fell nearly 2 per cent soon after opening, as the Middle East conflict promoted an acute supply crunch.
On Monday, the prime minister acknowledged people’s concerns about the threat of rising bills in the wake of the ongoing war.
But as the conflict shows no sign of slowing, Sir Keir warned economic damage will be more likely the longer it continues.
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.”
The chancellor is expected to address MPs in the Commons on Monday afternoon after meeting with her G7 counterparts to discuss a possible joint release of petroleum from reserves in an attempt to reduce the economic shock.
But the government has rejected suggestions that drivers should limit journeys are linked to any supply shortage, and it is understood that fuel imports are continuing as normal.
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.
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”.
US President Donald Trump also 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.
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!”
Downing Street has steered away from suggestions that the HMS Prince of Wales is being readied to deploy to the Mediterranean amid the war with Iran, and there has been no official decision taken to deploy her.
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”.
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