Price hikes due to Iran war will be felt for at least eight months, minister warns
Price rises as a result of the Iran war will be felt for at least eight months after the end of the conflict, a government minister has warned.
The Prime Minister’s Chief of Staff Darren Jones warned that people would see higher energy, food and flight prices “as a result of what Donald Trump has done in the Middle East” and said there would be “a long tail of this”.
The government has stepped up planning on how to offset potential shortages caused by the conflict following the closure of the Strait of Hormuz, a key shipping route vital for the supply of one-fifth of global oil and gas, causing oil prices to soar.
The Prime Minister will chair another meeting of the Cabinet committee set up to address the impact of the crisis on Tuesday, following last week’s meeting of the so-called Middle East Response Committee.
Meanwhile, an emergency planning group of ministers led by Mr Jones has been meeting twice a week. They focus on live monitoring of stock levels and seeing what plans are in place to address supply chain disruptions.
But Mr Jones told the BBC that consumers were more likely to see prices rise as a result of the conflict rather than gaps on supermarket shelves.
“Obviously this will probably come online not just in the next few weeks but in the next few months. There’s going to be a long tail after that,” he said.
Asked how long people will see economic disruption, Mr Jones said: “I think our best guess is more than eight months from the resolution point where you will see economic impacts coming through the system.
“So people are going to see higher energy prices, higher food prices and those kinds of issues, higher airfares as a result of what Donald Trump has done in the Middle East.
“The government in the UK, the work I’m doing with the prime minister, is looking at all of this and asking: ‘What can we do within our power to help people get through these difficult times?’”
Oil and gas prices have risen sharply since the conflict began at the end of February.
Earlier this month, the Bank of England warned that around 1.3 million more households in England face a rise in mortgage costs following the economic shock caused by the conflict.
The bank’s latest financial stability report (FSR) said the UK economic outlook was “deteriorating” and increasing pressure on UK households and businesses.
The government is trying to calm the public by warning drivers to keep filling up and not change travel plans due to fears of possible jet fuel shortages.
It comes after government documents leaked last week revealed Britain could see shortages of essential supermarket goods this summer if the Iran war continues.
Authorities have drawn up contingency plans for a “reasonable worst-case scenario” and have stressed that closing the key Strait of Hormuz shipping route could lead to carbon dioxide shortages.
Secret analysis – first reported by Times – was codenamed “Exercise Turnstone” and was run by the government’s emergency committee, Cobra.
The “reasonable worst case scenario” was based on the assumption that the Strait of Hormuz was not reopened and no peace agreement was reached.
It warned that CO2 supplies could fall to only 18 percent of current levels; The warning follows a mechanical failure at a major plant in the UK and high gas costs leading to a decline in production of ammonia and fertiliser, which converts CO2 into a by-product, across Europe.
Farming and hospitality will be the two worst-hit sectors because CO2 is used to extend the shelf life of foods, including salads, packaged meats and baked goods.
Supermarkets have since said they were working with the government to plan for a worst-case scenario in which food producers would be affected.
