British citizens are being cautioned about potential price increases and a slowdown in economic growth, even in the event of Donald Trump swiftly bringing an end to the conflict with Iran.
The FTSE 100, alongside other global stock markets, experienced a rally today following the U.S. President’s remarks suggesting that the military operations in the Middle East are nearing completion.
These statements led to a drop in oil prices from their previously soaring levels, despite ongoing uncertainty as the United States and Israel initiated another round of attacks.
Despite this, the strategic Strait of Hormuz, a critical passageway for approximately 20% of the world’s oil supply, remains largely inaccessible.
Experts are voicing concerns that the global repercussions of this crisis are already firmly established, regardless of a prompt resolution to the conflict.
Oil prices continue to linger about 20% higher than pre-crisis levels, with gas prices also on the rise. In light of these developments, the Bank of England is now seen as unlikely to reduce interest rates this month. Furthermore, there is apprehension that Rachel Reeves might be compelled to implement additional tax hikes to maintain fiscal balance.
Brits have been warned they face price spikes and an economic slowdown even if Donald Trump ends the Iran war soon
Oil prices tumbled from eye-watering highs overnight, despite mixed signals as America and Israel launched another wave of attacks
Speaking in the House of Commons last night, Rachel Reeves said the developments were already likely to push up inflation
The British Chambers of Commerce has warned that UK economic growth will slow and unemployment will continue rising.
The BCC’s latest economic report said the geopolitical situation remains ‘highly uncertain’ but could ‘change the economic outlook considerably’.
It predicted that headline CPI inflation will be 2.7 per cent by the end of the year, instead of the 2.1 per cent the body previously anticipated.
Keir Starmer has said the longer the war continues the more likely it is there will be economic damage in the UK.
Speaking in the House of Commons last night, Ms Reeves said the developments were already likely to push up inflation.
‘The economic impact of the situation in the Middle East will depend, of course, on its severity and its duration,’ the Chancellor said.
‘The movements that we have already seen are likely to put upward pressure on inflation in the coming months.’
Ms Reeves said she was ready to support ‘a co-ordinated release’ of international oil reserves to ease the economic shock of the crisis and called for action to ‘guarantee the security of vessels passing through the Strait of Hormuz’.
Economist Gillian Tett cautioned that that world does not ‘know what the off ramp is actually going to be or not be going forward’.
She told BBC Radio 4’s Today programme: ‘We’ve already seen the knock-on effect on supply chains with companies in Asia…. about half a dozen chemical companies declaring force majeure, which basically means they are ripping up their contracts because they can’t get access to the key components they need.
‘That type of event cannot be unwound quickly, and it’s not good for confidence.’
The Chancellor met the finance ministers of other G7 nations yesterday to discuss the possibility of such a release, but it concluded without agreement on any solid action.
Susannah Streeter, Chief Investment Strategist of Wealth Club, said the ‘flash of fear’ over oil prices was ‘fading’.
The FTSE 100 joined other stock markets rallying today after Mr Trump’s latest comments – although it remains lower than before the war began
She added: ‘A relief rally is now taking hold as hopes lift that an end to the conflict could be in sight.
‘But given that the fighting is continuing and the key Strait of Hormuz remains impassable, worry is still percolating.
‘Oil prices remain more than 25 per cent higher than before the conflict began. Trump has pledged that the US Navy will provide a guard for tankers through the Strait, but any timeline for that is highly obscured, with forces for now focused on taking out military infrastructure rather than becoming ship escorts.
‘Until a longer‑term resolution is found, companies and consumers are still set to pay the price for the attack by the US and Israel on Iran.’
