Politics latest: Inflation remains at 3% as Rachel Reeves warns of ‘significant’ challenges over Iran war

Business and money editor Karl Matchett reports:

Consumer Prices Index (CPI) inflation was already at 3 per cent for the 12 months to January, which marked the lowest level of inflation in the UK since March 2025.

However, despite the overall level remaining the same for the year to February, there were some differences in individual areas of goods and services. The 12-month cost of clothing and footwear rose to its highest point since March of last year, while food and non-alcoholic beverages slowed compared to January. Ironically, so too did transport costs – that is set for a sharp reversal though, when the next set of data comes through.

That is the overall concern here – that this data is already somewhat out of date. We already know that fuel has increased, we’ve been told how bad it could get with energy prices and there is a whole raft of additional areas that still face unknown price hikes depending on how long the situation goes on. That goes for everything from the very much day-to-day, such as grocery bills, to items that on first glance seem to have very little connection, like buying new mobile phones or your chances of getting a raise at work. That is how impactful, ultimately, something like this can be through the chain of oil supply, energy bills, inflation, interest rates, wage growth and the wider economy.

Business and money editor Karl Matchett reports:

The prime minister will face MPs on Wednesday as the UK works to develop a plan to reopen the vital Strait of Hormuz.

Sir Keir Starmer will undergo his weekly grilling at Prime Minister’s Questions a day after Rachel Reeves warned the economic impact of the Iran war could be “significant”.

Central to that impact is Tehran’s effective blockade of the Strait of Hormuz, a vital shipping route for oil and gas.

The blockade has seen oil prices soar above 100 US dollars a barrel and prompted Shell boss Wael Sawan to warn at an industry conference on Tuesday that Europe could face oil shortages by next month if it remains closed.

Donald Trump has repeatedly demanded other nations take a role in opening the strait, and the UK is currently leading efforts to formulate a plan to achieve that objective.

In a call with Saudi Arabia’s crown prince Mohammed bin Salman on Tuesday night, Sir Keir said the UK was “now working with partners on what a viable plan could look like to ensure the flow of goods through the key maritime route”.

However, any deployment of naval vessels is understood to be unlikely to take place while Iran continues to threaten ships in the strait with missiles and drones.

For its part, Iran insists the strait remains open to ships not aligned with nations it deems hostile.

ONS chief economist Grant Fitzner said: “After last month’s slowdown, annual inflation was unchanged in February as various price movements offset each other.

“The largest upwards driver was the price of clothing, which rose this month but fell a year ago.

“This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices.”

The steady picture for inflation does not yet reflect the impact of the conflict in the Middle East on the cost of living in the UK, with the first attacks taking place at the very end of February.

Oil and gas prices have jumped in recent weeks due to the conflict and other goods prices could also be affected by disruption to shipping through the Strait of Hormuz.

With the Iran war still upending the flow of oil around the world, the UK is set to see prices head back upwards.

Oil has risen from around $70 before the war starting to just shy of $100 now, though has spiked well above that milestone on more than one occasion over the past few weeks.

That is expected to feed through into not just higher energy bills but also transport and production costs going up, pushing inflation back in the opposite direction. Prior to the war starting, the Bank of England had signalled inflation was on course to reach the government-set target of 2 per cent by spring.

Meanwhile, the Institute of Grocery Distribution (IGD) has warned food inflation could surpass 8 per cent by June of this year, if “disruption to global energy markets persists”.

The chancellor has insisted the “right economic plan” is in place amid an “uncertain world”.

Rachel Reeves said: “In an uncertain world we have the right economic plan, taking a responsive and responsible approach to supporting working people in the national interest.

“We’re taking £150 off energy bills and providing targeted support for those facing higher heating oil costs.

“We’re also acting to protect people from unfair price rises if they occur, bring down food prices at the till, and cut red tape to boost long-term energy security – building a stronger, more secure economy.”

UK inflation flatlined at 3 per cent last month prior to the impact of the Iran war, according to official figures.

The rate of Consumer Prices Index (CPI) inflation was unchanged from the level reported in January, the Office for National Statistics (ONS) said.

It was in line with predictions from economists.

However, the steady picture for inflation does not yet reflect the impact of the conflict in the Middle East on the cost of living, with the first attacks taking place at the very end of February.