Prime Minister Keir Starmer convened energy companies, shipping groups and insurers on Monday to assess the economic fallout from escalating Middle East tensions, as a leading financial adviser warned that the British government must be transparent with the public about the risks ahead.
Nigel Green, chief executive officer of deVere Group, a global financial advisory firm, said the United Kingdom faces compounding pressures from rising energy costs, renewed inflation and growing fragility in the government bond market.
“The UK is more exposed than most advanced economies and that reality needs to be communicated clearly,” Green said.
Oil has climbed to around $115 a barrel, while European gas prices are moving higher. Roughly a fifth of global oil supply passes through the Strait of Hormuz, and disruption to that corridor is already affecting flows, raising the risk of delays and constrained supply.
Green warned that energy costs transmit quickly through the broader economy, affecting fuel, transport, food production and manufacturing. The UK has only recently emerged from a period of double-digit inflation driven largely by energy prices, and a renewed surge would arrive at a time when household finances remain under strain.
The energy price shock threatens to push Britain’s inflation rate back up, possibly to 5% later this year, according to some economists, delivering another setback to an already slow-growing economy.
Chancellor Rachel Reeves faces particular pressure. Green said her economic framework depends on inflation easing and stability returning, and that a sustained energy shock challenges that directly.
Currency markets face additional strain. The UK imports a significant share of its energy, meaning rising prices widen the trade deficit and place downward pressure on sterling, particularly during periods of heightened uncertainty.
The bond market is also exposed. The yield on the benchmark 10-year gilt has jumped around 68 basis points in the 15 trading days since the conflict began, with borrowing costs hitting levels not seen since the 2008 financial crisis.
With limited headroom in the public finances, markets worry that any government response to cushion households from higher energy prices could worsen borrowing dynamics.
Green concluded that Starmer and Reeves must level with the country. Investors, businesses and households, he said, should be preparing for higher inflation, pressure on the pound and increased volatility in the gilt market if disruption through the Strait of Hormuz continues.
