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Fuel prices displayed at a Shell garage in Southam, Warwickshire on March 23, 2026. | Jacob King\/PA Images via Getty Images<\/p>\nFor Starmer\u2019s government \u2014 headed for potentially brutal local elections in May \u2014 the crisis in the Gulf risks a nightmare combination of a rise in energy prices, interest rates, inflation and the cost of government borrowing that threatens to undermine everything he\u2019s done since winning office. <\/p>\n
Economists are now warning that even if Donald Trump\u2019s promise of a \u201ccomplete and total resolution of hostilities\u201d with Iran were to bear fruit, the effects on the British economy could still last for months.<\/p>\n
Already there are signs of a split within Starmer\u2019s party over how to respond. Labour MPs want the government to think seriously about action to protect households \u2014 but Starmer and Reeves have long talked up the need for fiscal responsibility, and economics are warning that there\u2019s little room for maneuver.<\/p>\n
Fuel prices displayed at a Shell garage in Southam, Warwickshire on March 23, 2026. | Jacob King\/PA Images via Getty Images<\/p>\n
Jim O\u2019Neill, a former Treasury minister who served as an adviser to Reeves, told POLITICO the government should \u201cnot get sucked into reacting to every external shock\u201d and \u201cconcentrate on boosting our underlying growth trend.\u201d<\/p>\n
Why the UK is so hard hit<\/p>\n
Just before the outbreak of war, there was reason for Starmer and Reeves to feel quietly optimistic about the long-stagnant British economy. The Bank of England had expected inflation to fall back sustainably toward its two percent target for the first time in five years, giving the central bank the space to carry on cutting interest rates.\u00a0<\/p>\n
With the Iran war in full flow, it was forced to rewrite those forecasts at the Monetary Policy Committee\u2019s meeting last week \u2014 and now sees inflation at around 3.5 percent by the summer.<\/p>\n","protected":false},"excerpt":{"rendered":"For Starmer\u2019s government \u2014 headed for potentially brutal local elections in May \u2014 the crisis in the Gulf…\n","protected":false},"author":2,"featured_media":33171,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[15071,14649,15072,2668,11283,2670,15073,177,2671,686,461,15074,15075,2673,1303,154,375,3528,12855,2038,1004,3509,34,688,15076,15077,207,49,12856,2676,3040,5880,811,691,36,226],"class_list":{"0":"post-33170","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-iran","8":"tag-andrew-bailey","9":"tag-angela-rayner","10":"tag-bailout","11":"tag-banks","12":"tag-budget","13":"tag-central-banks","14":"tag-competition","15":"tag-conflict","16":"tag-cost-of-living","17":"tag-crisis","18":"tag-culture","19":"tag-dan-bloom","20":"tag-debt","21":"tag-ed-miliband","22":"tag-elections","23":"tag-energy","24":"tag-energy-prices","25":"tag-finance","26":"tag-growth","27":"tag-imports","28":"tag-inflation","29":"tag-interest-rates","30":"tag-iran","31":"tag-keir-starmer","32":"tag-lisa-nandy","33":"tag-liz-truss","34":"tag-markets","35":"tag-middle-east","36":"tag-monetary-policy","37":"tag-rachel-reeves","38":"tag-rights","39":"tag-space","40":"tag-uk","41":"tag-united-kingdom","42":"tag-war","43":"tag-war-in-iran"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@iran\/116282008755475989","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/33170","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/comments?post=33170"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/33170\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media\/33171"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media?parent=33170"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/categories?post=33170"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/tags?post=33170"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}