You’re ungrateful, US tells Europe as Iran battle ‘Trumpflation’ leaves UK going through THREE rates of interest hikes by Christmas

America’s war chief demanded Brits say ‘thank you’ to Donald Trump today as the world faces a ‘Trumpflation’ shock from escalating Middle East carnage. 

In an extraordinary rant, Pete Hegseth condemned ‘ungrateful’ European allies for refusing to play their part in the conflict. 

He insisted the whole world ‘should be saying one thing to President Trump: Thank You’. 

The rebuke came as Brits face the prospect of three interest rate hikes by Christmas, with the Bank of England battling to contain a looming inflation train wreck.

Markets have taken fright after Iran struck a massive Qatar gas field with missiles in response to an Israeli attack – sending prices spiking. Oil refineries in Kuwait were also on fire from other strikes this morning.

Mr Trump has threatened to ‘massively blow up’ Tehran’s facilities if they target more infrastructure of neighbouring Arab states. 

The Bank of England gave mortgage-payers a taste of the misery to come this lunchtime, unanimously voting to put interest rates on hold at 3.75 per cent. 

Just a fortnight ago there were widespread hopes of a cut – but now traders are betting on a quarter-point rise in April and potentially two more by the end of the year.

The Monetary Policy Committee said that instead of returning to the 2 per cent target in the second half of the year as anticipated, CPI inflation could reach 3.5 per cent. In an ominous signal, the policymakers said they ‘stand ready to act as necessary’.

UK pump prices are already soaring, and the energy bills price cap looks almost certain to increase dramatically when the protection expires in July. 

Tehran has effectively closed the Strait of Hormuz, through which a fifth of the world’s oil supplies pass, with no obvious timetable for the channel to reopen.

A statement from Britain, France, Germany, Italy, the Netherlands and Japan this afternoon said they are ‘ready to contribute to appropriate efforts to ensure safe passage through the Strait’ – although that is unlikely before the ‘hot’ war ceases.

Higher rates will weaken an already floundering economy with official figures today showing unemployment stuck at a five-year high of 5.2 per cent and youth unemployment of 14.5 per cent – a level not seen since early 2015.

On another day of chaos in the Middle East and around the world:

• UK gas prices surged by as much as a third this morning in the wake of the devastation at some of the region’s biggest refinery sites;
• Mr Trump has suggested the US could simply walk away instead of trying to reopen the Strait of Hormuz, arguing that America is energy independent – even though it is affected by global prices;   
• Trade minister Chris Bryant risked inflaming Transatlantic tensions by suggesting Mr Trump ‘doesn’t know what he’s doing’ and it was ‘obvious’ Iran would block the Strait; 

Two Kuwaiti oil refineries have been on fire today after Iran unleashed fresh drone attacks on its Gulf Arab neighbours’ energy infrastructure following an Israeli strike on Tehran’s biggest natural gas field.

Authorities said a strike at Mina Al-Ahmadi oil refinery, one of the largest in the Middle East, had sparked a fire while the Kuwait Petroleum Corporation later confirmed its Mina Abdullah Refinery in the south of the country was also hit.

Meanwhile, a projectile also hit a ship off the coast of Qatar and firefighters were tackling a blaze at a major LNG facility following Iranian attacks.

European gas prices jumped by over 30 per cent amid fears of $200-a-barrel oil and economic fallout lasting years.

In a stream of consciousness Truth Social post, Trump claimed the US had no knowledge of an attack on the South Pars Field by Israel and warned the US will take unprecedented action if Tehran continues to strike energy sites across the Gulf in retaliation.

‘I do not want to authorise this level of violence and destruction because of the long term implications that it will have on the future of Iran,’ he said in a post on Truth Social, adding he ‘will not hesitate’ to strike back.

At his press conference, Mr Hegseth insisted the war in Iran – which has so far killed 13 US troops and wounded 140 more across the Middle East – would not be the ‘quagmire’ of Iraq and Afghanistan, the legacy of ‘foolish politicians like Bush, Obama and Biden’.

The former Fox News host told the Pentagon briefing: ‘The media here wants you to think, just 19 days into this conflict, that we’re somehow spinning toward an endless abyss or quagmire. Nothing could be further from the truth.’

A joint statement with Keir Starmer and the leaders of France, Germany, Italy, the Netherlands and Japan said: ‘We condemn in the strongest terms recent attacks by Iran on unarmed commercial vessels in the Gulf, attacks on civilian infrastructure including oil and gas installations, and the de facto closure of the Strait of Hormuz by Iranian forces.

‘We express our deep concern about the escalating conflict. We call on Iran to cease immediately its threats, laying of mines, drone and missile attacks, and other attempts to block the strait to commercial shipping, and to comply with UN Security Council resolution 2817.’

The countries said the effects of Iranian actions will be felt in all parts of the world, especially by the most vulnerable people.

‘We express our readiness to contribute to appropriate efforts to ensure safe passage through the strait. We welcome the commitment of nations who are engaging in preparatory planning,’ they said.

Before the crisis erupted the BoE had been forecasting that headline CPI inflation could fall close to the 2 per cent target by April.

But the MPC said today that it now expected inflation to be around 3 per cent in the second quarter of 2026, up from the 2.1 per cent that had been forecast in February.

Higher wholesale gas prices could then feed through into a higher Ofgem energy price cap from July, which could add around 0.75 percentage points to inflation over the third quarter.

This, combined with firms potentially passing on higher energy costs to consumers, could mean CPI inflation increases to up to 3.5 per cent in the third quarter, up from the previous 2 per cent forecast, the MPC said.

The Bank said that even a short-lived conflict was likely to leave energy prices elevated for a sustained period, and if the war continues to escalate then inflation could be pushed up further.

Mr Bailey said: ‘War in the Middle East has pushed up global energy prices.

‘You can already see that at the petrol pump and, if it lasts, it will feed into higher household energy bills later in the year.

‘The best way to tackle this is at the source by reopening energy supply lines.’

Mr Bailey stressed in his rationale in holding interest rates steady was that while monetary policy ‘cannot reverse the shock to supply’, it must ‘respond to the risk of a more persistent effect on UK CPI inflation’.

Last night the US Federal Reserve left its interest rate on hold in the range of 3.5 per cent to 3.75 per cent – where it has been since December despite huge pressure from Mr Trump. 

Fed chairman Jerome Powell said the future path would depend on whether inflation keeps falling.

‘We just don’t know what the effects of this will be and really no one does,’ he said.

Chris Beauchamp, Chief Market Analyst at IG: ‘If anyone was in doubt as to how the BoE would respond to the current situation, then today is clear. 

‘A dramatic shift has taken place, and hikes are back on the table as the Bank scrambles to respond to the likelihood of another inflation surge. 

‘This was all unthinkable just weeks ago, but is a sign of how the war with Iran has upended everyone’s forecasts.’ 

Susannah Streeter of Wealth Club said the ‘knock-on effects of higher energy prices will have toxic repercussions worldwide’.

‘Bank of England decision-makers have understandably turned super-wary as war rages in the Middle East, with an energy crisis mounting and inflationary pressures building sharply,’ she said. 

‘Shockflation fears are rising as oil and gas prices escalate to scorching levels, which risk spilling over into broad price rises across the economy. They are now forecasting that the headline rate of inflation will rise to 3.5 per cent in March, almost half a percentage point higher than expected in the February Report. 

‘So, they feel they have little choice but to sit on their hands, watching and waiting to see how the conflict evolves.

‘They are also having to grapple with an economy which has ground to a halt and risks going into reverse as consumers and companies batten down the hatches and become cautious about spending. 

‘Cooling wage growth in the latest jobs data reflects a weakening labour market. Ordinarily, that would have nudged the committee into agreeing a cut to interest rates, but they are hamstrung by international events.’

Joe Nellis, an economic adviser at accountancy firm MHA, said: ‘Interest rates are unlikely to fall anytime soon and could even rise again.

‘The Bank has a tough balancing act on its hands, knowing that raising rates could hinder economic growth. But its main priority will always be stabilising prices. Policymakers will not be afraid to hike interest rates if necessary to prevent spiralling inflation.’

Nellis said: ‘The rapidly escalating crisis in the Middle East has introduced a new and potentially powerful inflationary risk.

‘Oil and natural gas prices have risen significantly in global trading markets, reflecting concerns about possible disruptions to supply and key shipping routes. If these increases are sustained, the impact could quickly feed through into higher transport costs, rising manufacturing expenses and more expensive household energy bills.

‘The Bank will be keen to be on the front-foot in their fight against inflation. Policymakers at the Bank, along with those at central banks across the globe, were criticised for being too slow to act when global inflation began to rise in 2021-22.’

Trump’s choice of successor to lead the Fed – Kevin Warsh – will face the tricky task of responding to inflation fears brought about by the war as the President presses for cuts.

Soaring gas and oil prices are already hitting UK homebuyers as mortgage lenders stop offering their best deals.

Markets now see a 60 per cent chance of a Bank of England rate hike from 3.75 per cent to 4 per cent in June. And the chances of any cuts over the coming year have collapsed to almost zero.

Figures from Moneyfacts show the average two-year fixed mortgage deal stands at 5.3 per cent, the highest since February last year.

The annual cost of a typical two-year fix is now £788 higher than two weeks ago for a £250,000 loan over 25 years. The average five-year fix, at 5.35 per cent, is the highest since August 2024.

Almost all of the 500 sub-4 per cent deals available last week have been pulled, Moneyfacts said.

Adam French, its head of consumer finance, said: ‘The financial effects of ‘Trumpflation’ are hitting home as conflict in Iran is driving inflation concerns. 

That has forced markets to rethink the outlook for cuts, pushing borrowing costs higher and prompting lenders to pull and reprice deals.

‘The window for ultra-competitive sub-4 per cent rates has been slammed shut.’