Rachel Reeves has issued a dire warning that the conflict with Iran is “likely to put upward pressure on inflation”, in another blow to the economy. The Chancellor told the Commons that she’s ready “to support a co-ordinated release” of international oil reserves to ease the crisis. Despite this, she claimed the British economy is strong enough to withstand shocks.

Ms Reeves told MPs: “I am clear-eyed about my response to the current situation. My economic approach will both be responsive to a changing world and responsible in the national interest. The 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.

“I want to ensure the country that the fundamentals of Britain’s economy are strong. Every step that I have taken since the election has built our national resilience.

“Stability in the public finances, investment in infrastructure in both defence and energy security, and reform to our economy.”

She also called for action to “guarantee the security of vessels passing through the Strait of Hormuz” – one of the world’s most vital choke points, through which a fifth of the world’s oil supplies pass.

The Chancellor met the finance ministers of other G7 nations on Monday to discuss the possibility of such a release, but the meeting concluded without agreement on any concrete action.

Since the US and Israel began their campaign against Iran just over a week ago, oil prices have soared above $100 (£75) a barrel for the first time since 2022.

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Brent crude futures – considered the global benchmark for oil prices – rose by 12.63% to reach $104 (£78) per barrel. As a result, drivers in the UK have been warned of a 6p-a-litre rise in petrol and diesel costs – a 16-month high.

New data from the RAC has found that the average diesel price hit 148.4p on Friday, up from 142.4p per litre recorded just last week, the highest diesel price rise since August 2024.

Ms Reeves, however, maintained that she was “taking action to ensure that people pay the lowest possible price at the pump” and promised MPs would get a meeting focused on heating oil prices.

She pointed to cuts in fuel duty, adding: “I am also taking action to ensure that people pay the lowest possible price at the pump.

“The new cheap fuel finder that I confirmed at the budget is currently being delivered, helping consumers find the cheapest price for their fuel.

“Almost 90% of petrol retailers have already registered for this and last week, I instructed my officials to accelerate the integration of the cheaper fuel finder with map applications.

“This week, I am meeting with petrol forecourt operators, and I will not hesitate to call out retailers who fail to provide data to the fuel finder.

“I am clear that the best way to keep prices at the pump low is rapid de-escalation, and I will continue to monitor prices as the situation develops.”