Chancellor Rachel Reeves has warned that the economic fallout from the Iran conflict will persist even after hostilities cease, as she joined international counterparts in a joint statement calling for a coordinated response. The statement, signed by finance ministers from 11 countries including Ireland, Australia, and Japan, cautioned against knee-jerk reactions to the cost-of-living crisis triggered by the war.
The ministers acknowledged that US-Israeli strikes and Iran's retaliation had caused 'unacceptable loss of life and significant disruption to the global economy and financial markets,' and welcomed the ceasefire. They urged a swift negotiated resolution to ensure free passage through the Strait of Hormuz, a critical waterway for global energy supplies.
However, the statement stressed that even with a durable resolution, impacts on growth, inflation and markets will persist. Reeves, in Washington for IMF spring meetings, emphasised that a sustained ceasefire and avoiding knee-jerk responses are key to limiting costs for households. She noted that household energy bills are forecast to rise due to higher oil and gas prices, with motorists already feeling the pinch at the pump.
Reeves signalled that any energy bill help will be targeted at the poorest households, rather than a universal bailout. She is under pressure to scrap fuel duty increases set for September. The IMF has slashed its UK GDP forecast for 2026 to 0.8%, the largest downgrade among G7 economies.
Meanwhile, US President Donald Trump suggested talks with Iran could resume soon, claiming the conflict is nearing completion. Diplomats continue efforts to keep the Strait of Hormuz open, as Prime Minister Sir Keir Starmer coordinates international action to mitigate economic disruption.
