Chancellor Rachel Reeves could see her plans to tackle inflation and boost growth disrupted by the escalating conflict in the Middle East, economists warn. The looming energy crisis comes as Reeves prepares to deliver her spring forecast later today.

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OBR Forecasts Show Progress, but Risks Loom

The Office for Budget Responsibility (OBR) is expected to show that the UK’s public finances remain on track, with the £22 billion fiscal buffer introduced in the November budget largely intact. Under normal circumstances, this would reinforce Reeves’s message that the government has “the right economic plan for our country, in a world that has become more uncertain.”

However, experts caution that the OBR’s projections could quickly become outdated if recent spikes in oil and gas prices persist. The surge comes after the widening Middle East conflict, particularly the Iran war, triggered disruptions in global energy supply chains.

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Gas Prices Pose the Bigger Threat

While oil prices have climbed significantly, economists note that the bigger concern for the UK economy is natural gas. Rising gas prices directly affect household energy bills and industrial costs, which could put renewed pressure on inflation and erode consumer spending.

A sustained gas shock, they warn, could undermine Reeves’s efforts to stabilise prices and stimulate growth, especially at a time when households are still sensitive to energy costs.

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Reeves’s Response

In her spring forecast, Reeves is expected to reaffirm the government’s commitment to fiscal stability and investment in infrastructure, while emphasising growth that benefits all regions of the UK. She will argue that the state must step up, rather than stand back, to support the economy amid global uncertainty.

The chancellor is not expected to announce major policy changes today, as the UK government traditionally reserves major fiscal interventions for the autumn budget statement.

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What This Means for the UK Economy

• Rising global energy prices could boost inflation, particularly through higher household gas bills and petrol costs.
• Businesses may face higher operating costs, which could slow investment and productivity growth.
• The UK government’s fiscal plan remains solid in the short term, but ongoing Middle East instability could require adjustments in future forecasts.

Economists are watching closely to see whether the latest energy shocks force a reassessment of growth and inflation projections, potentially influencing future policy decisions.