Starmer Warns Iran Conflict Could Prolong Cost of Living Crisis for Months
Prime Minister Sir Keir Starmer issued a stark warning on Monday, stating that the ongoing conflict with Iran could reignite the cost of living crisis for several months. The Prime Minister led an emergency Cobra meeting on Monday night to assess the potential impact of the conflict on inflation and household energy bills.
Emergency Cobra Meeting and Economic Concerns
In a clear sign of deep concerns about the wider economic fallout, the Downing Street meeting was attended by Bank of England Governor Andrew Bailey. Sir Keir earlier told MPs that he did not want to offer "false comfort" by suggesting the war would have a "quick and early end," despite claims from Donald Trump about working on a deal with Tehran's leadership.
The Prime Minister revealed that ministers are already developing contingency plans to provide targeted assistance with energy bills next winter. When questioned about the crisis duration, Sir Keir told the liaison committee: "It's hard to answer that question, if I'm honest. I think all our focus and energy has to be on swift de-escalation, but we've got to plan on the basis that it could go on for some time."
Energy Market Turmoil and Expert Warnings
Oil and gas prices experienced significant turmoil on Monday before Trump's sudden claim of a five-day ceasefire agreement with Tehran regarding attacks on energy targets. However, experts remain concerned that with Iran disrupting shipping in the Gulf, energy prices could remain elevated for months.
Fatih Birol, executive director of the International Energy Agency, delivered a particularly alarming assessment, stating that the impact of a potential Strait of Hormuz closure could surpass both the oil shocks of the 1970s and the gas shortages following Russia's invasion of Ukraine. Birol noted: "Many of us remember the two consecutive oil crises in the 1970s. At that time, in each of the crises, the world lost about five million barrels per day - both of them together, ten million barrels per day. As of today, we have lost 11 million barrels per day - more than two major oil shocks put together."
Government Response and Financial Constraints
While Sir Keir confirmed that household energy bills will decrease next month and remain capped until the end of June, analysts from Cornwall Insight forecast the energy price cap could then increase by £332 in July. The Prime Minister suggested the government might intervene to help struggling families at that point, but emphasized ministers are also preparing for potential further bill increases in October.
However, Sir Keir indicated the country cannot afford a repeat of the extensive support measures introduced by the Conservatives in 2022, which capped energy bills at a cost of approximately £40 billion to taxpayers. "I'm acutely aware of the state of public finances," he stated. "There are difficulties because we don't know the extent of the challenge we're facing because we don't know when this conflict is going to end, but we are actively looking at what measures we can put in place."
Competition Measures and Business Support
Chancellor Rachel Reeves will update MPs on Tuesday regarding measures to strengthen competition authorities to prevent profiteering, alongside proposals to accelerate renewable and nuclear energy construction. The Prime Minister confirmed the Chancellor will provide the Competition and Markets Authority with "further teeth" to address profiteering concerns.
Sir Keir also mentioned that ministers are examining potential support for businesses not covered by the energy price cap, with some firms facing a 40 percent increase in standing charges by next week. The Chancellor will additionally announce plans to underwrite "critical" energy security projects to prevent delays from legal challenges, insisting that "the blockers" should not hinder efforts to reduce Britain's dependence on oil and gas.
Despite these measures, government sources have ruled out immediate bailouts for families and businesses struggling with rising bills, with Sir Keir downplaying prospects for blanket support schemes similar to those implemented after Russia's invasion of Ukraine in 2022.
