British Finance Minister Rachel Reeves told lawmakers on Wednesday that it is premature to draw firm conclusions about how the ongoing Middle East conflict will influence the United Kingdom's economy. Speaking to the Treasury Committee, she cautioned against speculation over likely effects on inflation, growth or interest rates at this early stage.
Reeves said the government is examining a range of potential scenarios and is keeping a close watch on developments as they unfold. She emphasised that, for now, forecasting precise changes to core macroeconomic indicators would be unwise.
The finance minister has previously warned that inflation is likely to rise because of higher global energy prices linked to the U.S.-Israeli war with Iran. When members of the committee asked whether the UK could afford large-scale cost-of-living support similar to measures introduced after Russia's full-scale invasion of Ukraine in 2022, Reeves said the government will do everything possible to shield consumers while preserving national security as an economy.
Reeves also noted that Prime Minister Keir Starmer has signalled an intent to accelerate increases in defence spending. In her testimony, she argued that the UK is in a stronger fiscal and economic position now than when she served as chancellor, and that the country is in many respects better placed than it was at the time of Russia's invasion of Ukraine. She added that targeted consumer support is more practicable today than it was four years ago.
Financial markets have already reflected some of the uncertainty. British government bonds have fallen sharply since the Middle East conflict began, a move that market participants attribute in part to worries that the government may need to increase borrowing to protect households and businesses from higher energy costs.
Reeves' comments underline a cautious approach: active monitoring, scenario planning, and a commitment to consumer protection - all while navigating the trade-offs between support measures, defence spending priorities, and public finances.