The Trades Union Congress (TUC) has warned that British workers are facing a “Donald Trump-made cost of living crisis” as the US offensive against Iran continues to destabilize global markets. Chancellor Rachel Reeves echoed these concerns, stating that the UK is “likely to be hit” by rising inflation due to the escalating conflict. While the Chancellor has promised to support households, she has so far resisted calls to cancel a planned increase in fuel duty.
The geopolitical situation took a dark turn this week as US and Israeli warplanes conducted massive strikes across Iran, coinciding with the rise of Mojtaba Khamenei to the position of Supreme Leader. This leadership change in Tehran has led to a more aggressive stance on global energy exports, with Iran threatening to shut down the Strait of Hormuz. Such a move would block 20% of the world’s liquid natural gas, a scenario that would have devastating effects on the UK’s energy costs.
To prevent domestic companies from taking advantage of the turmoil, the government has ordered the competition watchdog to monitor fuel and heating oil prices. Reeves has made it clear that “wartime profiteering” will not be tolerated, as she attempts to maintain public confidence during a period of extreme price volatility. This regulatory focus is part of a broader strategy to shield the economy from the worst “shocks” of the conflict.
The Bank of England’s revised forecast, which suggests interest rates will remain high until 2027, indicates that the inflationary impact of the war will not be short-lived. This has led to concerns that the UK could enter a period of prolonged economic stagnation if energy prices do not stabilize soon. The government is currently coordinating with the G7 to determine if a massive release of oil reserves could help bring prices back to manageable levels.
As the political battle over fuel duty intensifies in the House of Commons, the Starmer administration is under pressure to be more “explicit” about the causes of the crisis. Supporters argue the government must clearly communicate that the rising costs are a direct result of international conflict rather than domestic policy. For now, the UK remains in a “wait and see” mode, hoping for the “rapid de-escalation” that Reeves says is the only true fix.