The UK government is bracing for “insanely profound” economic fallout from the escalating conflict in the Middle East, with officials warning of a potentially crippling spike in energy costs, according to a government source. The assessment comes as Chancellor Rachel Reeves convened an “Iran response board” to mitigate the economic impact of the crisis and protect household energy bills.
The move followed strikes carried out by the United States and Israel against targets in Iran on February 28th, prompting retaliatory strikes by Iran across the region. Prime Minister Keir Starmer confirmed the UK played no role in the initial strikes, but condemned Iran’s subsequent attacks, stating the regime poses a “direct threat” to the UK, with over 20 potentially lethal attacks on UK soil in the past year.
Even as Starmer has pledged to prioritize working families, the potential for soaring oil prices has prompted urgent planning within the Treasury. Reeves tasked her top official with assembling the response board to assess the economic risks and formulate potential government interventions. The focus is on protecting both the economy and consumers from the effects of sustained high oil prices.
The situation has unfolded rapidly since the initial strikes. Just seven days ago, on March 8th, Starmer spoke with U.S. President Donald Trump for the first time since Trump publicly criticized the UK’s response to the Iranian conflict. No 10 released limited details of the call, stating the two leaders discussed the situation in the Middle East and military cooperation. However, Trump had previously expressed frustration with Starmer’s refusal to allow the utilize of UK bases for initial offensive strikes against Iran, and publicly questioned the UK’s commitment as an ally.
The UK has deployed defensive capabilities in the region, with British planes actively participating in coordinated regional operations to protect its interests and allies, in line with international law. Foreign Secretary Yvette Cooper defended Starmer’s stance, asserting that the UK government would not simply align its foreign policy with other countries, but would instead prioritize British interests.
The government’s response comes amid growing concerns about the broader implications of the conflict. The Prime Minister’s statement on February 28th highlighted the regime’s “abhorrent” behavior and the need to prevent Iran from developing a nuclear weapon, which remains a primary aim of the UK and its allies. However, the immediate economic challenge of managing potential energy price increases remains a central focus for Reeves and her team.
