Rachel Reeves urges US to barter with Iran as she hints at bailout for Brits… with oil prices creeping up once more

Rachel Reeves urged the US to negotiate with Iran today as she insisted ending the war is the best way of ‘minimising’ pain for Brits.

Giving evidence to MPs, the Chancellor said the UK had urged Donald Trump‘s administration to return to talks.

Ms Reeves said it was ‘too soon’ to know the impact of the Middle East crisis on the economy, saying ministers were ‘working hard’ to ‘de-escalate’ the situation.

But she suggested there could be scope for a ‘short-term’ bailout for families if the chaos causes another cost-of-living squeeze, saying the government was looking at all ‘eventualities’. 

Rachel Reeves urged the US to negotiate with Iran today as she insisted ending the war is the best way of ‘minimising’ pain for Brits

The comments came amid signs oil prices are creeping up again, after markets were temporarily calmed by Mr Trump saying the military campaign against Iran was ‘almost complete’

Markets were calmer yesterday after Donald Trump suggested the military campaign in the Middle East is ‘very complete’ 

Asked at the Treasury Select Committee whether she agreed there was no upside to the chaos, Ms Reeves replied: ‘It’s certainly not good for the British economy to have trade disrupted, especially when so much oil and gas comes from that part of the world.

‘But the best thing that we can do as a Government is to seek to de-escalate this conflict.’

She said ‘the quicker we can de-escalate, the better it will be for all of those different economic variables’.

Pressed whether Britain had been urging the US to ‘return to the negotiating table’ with Iran in private meetings, Ms Reeves said: ‘Yes, absolutely.’ 

On whether the government had enough financial firepower to support households, as happened over the Ukraine war, Ms Reeves said: ‘Of course the Treasury is always planning for different eventualities. 

‘We saw the impact of higher oil and gas prices just a few years ago after Russia’s illegal invasion of Ukraine. 

‘We are looking at a whole range of different scenarios. One reason why any future package – if it were necessary – would be more affordable is that we are now less reliant on international energy price movements than we were before Russia invaded Ukraine because we have invested more in homegrown, renewable energy. 

‘Of course we are working on different ways in which to protect people including more targeted support.’ 

G7 countries, whose finance and energy ministers have met in recent days, are mulling the release of strategic oil reserves.

‘I’ve been very clear that the UK is willing to play its part in using those reserves to put downward pressure on oil prices and ensure that supply remains strong,’ Ms Reeves said.

‘We’re working closely with both our allies in the Gulf and in the G7 and also with the insurance industry to ensure that as quickly as possible we can get those movements going again.’

The comments came amid signs oil prices are creeping up again, after markets were temporarily calmed by Mr Trump saying the military campaign against Iran was ‘almost complete’.

The cost of a barrel of Brent crude is around a fifth higher than before the US airstrikes were launched.   

The Strait of Hormuz, through which around a fifth of the world’s oil passes, remains effectively shut. There have been reports that Tehran is laying mines, although the picture is confused. 

Officials from the Treasury’s OBR watchdog said yesterday that if oil and gas prices hold at current levels it could mean inflation sticking at around 3 per cent until the end of the year.

That is a percentage point higher than the body predicted at the Spring Statement just last week, and well above the Bank of England’s 2 per cent target. 

Prof David Miles told the same committee yesterday that if energy prices spiked again the situation could be far worse.

However, he also suggested that a quick return to lower levels would mean ‘very limited’ impact on inflation across the year.

Petrol prices have risen by 3.5p in a week to 135.67p a litre, while diesel is up 6.9p to 149.01p as consumers start to feel the impact. 

There had been hopes that Threadneedle Street would ease pressure on mortgage-payers by cutting interest rates this month, but the Middle East crisis looks to have dashed those hopes.

The forecasts released by the OBR only last week suggested CPI inflation would be falling sharply to 2 per cent this year