The Japan Times - UK finance minister warns of higher inflation amid Iran war

"The economic impact of the situation in the Middle East will depend, of course, on its severity and its duration," Reeves told MPs in parliament after taking part in a meeting of G7 finance ministers.

"The movements that we have already seen are likely to put upward pressure on inflation in the coming months."

Britain's annual inflation rate had eased in January with the Consumer Prices Index falling to 3.0 percent from 3.4 percent in December, official data showed last month.

It had been some welcome good news for Prime Minister Keir Starmer's Labour party which has struggled to revive Britain's sluggish economy since winning a general election in July 2024.

Starmer said Monday the government was monitoring the impact of the war.

"The longer this goes on, the more likely the potential for an impact on our economy, impact into the lives and households of everybody and every business," Starmer said.

"Our job is to get ahead of that, to look around the corner, assess the risk, monitor the risks, and work with others in relation to that."

The prime minister tried to reassure the public amid deep concerns over prolonged cost-of-living pressures and high energy bills which have soared since Russia's invasion of Ukraine in 2022.

Starmer insisted the government was prepared to handle the economic fallout, with most households protected until summer by a price cap on gas and electricity.

The G7 leaders discussed a joint release of strategic oil reserves coordinated by the International Energy Agency (IEA), but decided they were not "not there yet," French Finance Minister Roland Lescure told reporters.

Starmer also defended ties between Washington and London, which looked increasingly frayed in the last week with US President Donald Trump criticising the British leader for initially refusing to have any role in the war.

"The discussion with our US counterparts, is happening at all levels, all of the time, every single day. That's the nature of the relationship," said Starmer, who on Sunday held his first phone call with Trump since the war broke out on February 28.

But he insisted that "decisions about what's in Britain's best interests are decisions for the prime minister of Britain."

T.Shimizu--JT