Middle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPs

Middle East warAdd to myFTGet instant alerts for this topicManage your delivery channels hereRemove from myFTMiddle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPsConservatives have called for chancellor to halt planned rise in fuel duty UK chancellor Rachel Reeves told MPs on Monday that the Treasury would hold talks on curbing price rises for heating oil © House of CommonsMiddle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPs on x (opens in a new window)Middle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPs on facebook (opens in a new window)Middle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPs on linkedin (opens in a new window)Middle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPs on whatsapp (opens in a new window) Save Middle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPs on x (opens in a new window)Middle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPs on facebook (opens in a new window)Middle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPs on linkedin (opens in a new window)Middle East crisis ‘likely’ to push UK inflation up, Rachel Reeves tells MPs on whatsapp (opens in a new window) Save George Parker and Jim Pickard in LondonPublishedMarch 9 2026Jump to comments sectionPrint this pageUnlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.UK chancellor Rachel Reeves has admitted that the crisis in the Middle East is likely to “put upward pressure on inflation” in the coming months, as she briefed MPs on her first steps to tackle what could become a fresh cost-of-living crisis.Her statement confirmed the danger the US-Israel war with Iran poses to her economic plan. Only last week Reeves presented a spring forecast in which she pronounced she was building a “stronger and more secure economy” with “inflation and interest rates falling”. Reeves said on Monday that the Treasury would hold talks on curbing rises in the price of heating oil — a big source of fuel in Northern Ireland and rural areas — and would “monitor” fuel costs for motorists ahead of a planned rise in fuel duty in September.The Conservatives have called for Reeves to halt the rise in fuel duty but for now the chancellor has asked the Competition and Markets Authority to be “vigilant” for any signs of price-gouging or other exploitation of consumers.Separately, Reeves said she had agreed that the Ministry of Defence would be able to fund defensive operations in the Middle East from the contingency reserve, meaning the cash would come from the Treasury rather than the MoD’s already-stretched budget.Show video infoShow video descriptionVideo descriptionTranscriptRachel Reeves vows to support families in the face of an energy crisis due to the Middle East conflictThe economic impact of the situation in the Middle East will depend, of course, on its severity and its duration. The movements that we have already seen are likely to put upward pressure on inflation in the coming months. But I also want to confirm to the House that our financial markets are functioning and I'm in regular touch with the Governor of the Bank of England. This afternoon I spoke with G7 finance ministers, setting out my priorities for the international cooperation needed. First, calling for immediate de-escalation and a return to the diplomatic process. Second, we must guarantee the security of vessels passing through the Strait of Hormuz. Third, I stand ready to support a coordinated release of collective International Energy Agency oil reserves. And 4th, the UK will play its part as the global hub of maritime insurance, and I am meeting with the chair of Lloyd's of London later today, where we will discuss how best to support the continued passage of maritime trade.Rachel Reeves vows to support families in the face of an energy crisis due to the Middle East conflict © House of CommonsReeves’ briefing to MPs was essentially a holding statement as she braces for the possibility that her economic strategy is upended by what the Trades Union Congress general secretary Paul Nowak called a “Donald Trump made cost-of-living crisis”.The last Conservative government spent almost £80bn on energy support for households and businesses following Russia’s full-scale invasion of Ukraine, and Reeves admitted that the best hope for the economy was “immediate de-escalation” of the Iran crisis.With pressure expected to rise on Reeves to cushion households and businesses against the rising cost of energy, the chancellor said: “I will take the necessary decisions to help families with the cost of living and protect the public finances.“My economic approach will both be responsive to a changing world and responsible in the national interest.” She added: “The movements we have already seen are likely to put upward pressure on inflation in the coming months.”The energy price cap will shield households from rising prices until the end of June, but fuel prices at the forecourt are already rising ahead of an end to a fuel duty freeze that was introduced in 2011.A 5p rise in fuel duty is scheduled to be phased in from September.Shadow chancellor Sir Mel Stride said: “The latest developments in the Middle East make it even more important for Rachel Reeves to reverse course and scrap the rise in fuel duty she announced at the Budget.”In the shorter term, Reeves has asked the Treasury to look at ways to curb rises in heating oil, which is used by 3 per cent of homes across Britain and 63 per cent of homes in Northern Ireland. About 1.5mn households are affected.Government officials say it is “early days” but direct state intervention to hold down prices is being considered. Heating oil is not covered by the Ofgem energy price cap.Energy minister Michael Shanks has also asked the CMA to gather evidence on the heating oil market to make sure customers are being treated fairly.While Treasury officials are drawing up a range of options for dealing with a jump in energy prices, Reeves does not want to commit now to any course of action. “Let’s just hope the war ends soon,” said one ally.Kwasi Kwarteng, Tory chancellor in Liz Truss’s government, said it felt “scary” to be in the position where the government was offering to subsidise fuel bills with no idea where energy prices might end up. “It’s like pinning a tail on a donkey — it’s blind man’s buff,” he told the FT. “The political imperative is to do something and do something generous.” Kwarteng said the fallout could see Reeves having to put up taxes in the autumn to foot the bill.Kwarteng said it was very difficult to target individual groups for help because it created “cliff edges” and political problems.Reuse this content (opens in new window) CommentsJump to comments section Follow the topics in this article Middle East war Add to myFT Oil Add to myFT UK Budget Add to myFT UK economy Add to myFT Energy crisis Add to myFT Comments