Global stock markets plummeted as Donald Trump’s war in Iran triggered fears of an inflation crisis.

Shares plunged and energy prices surged as Rachel Reeves’s budget watchdog warned that households faced an economic shock within weeks.

Israeli and US jets launched new strikes on Iran, fuelling a market rout that has wiped £100bn off the FTSE 100 in 48 hours and added billions of pounds to Britain’s borrowing costs.

The UK’s flagship stock index plunged by more than 3pc on Tuesday in its worst day since the US president’s “Liberation Day” tariff onslaught last April.

Losses were heavier in European markets as the price of oil and gas soared over concerns the conflict in the Middle East could choke off supplies.

The Chancellor sought to allay fears of an imminent crisis even as the Office for Budget Responsibility (OBR) warned that Britain was just “weeks” away from higher petrol and diesel costs.

Ms Reeves admitted that Britons were living in an “increasingly dangerous world” as official forecasts predicted rising unemployment and weaker growth this year.

OBR official David Miles warned that a “new normal” of higher energy prices was “unambiguously bad news” for the economy.

European natural gas prices surged another 25pc after climbing 40pc on Monday in response to Qatar shutting off its gas production following Iranian missile strikes.

Mr Miles said a sustained increase would have “a material impact on inflation, because it’ll largely get passed through.”

Presenting the watchdog’s latest forecasts - rendered redundant by the conflict in Iran - Mr Miles said: “It’s unambiguously bad news. The UK is a major importer of energy, so there’s nothing good about energy prices being higher.”

He added: “This is all an increase in costs to the UK. It is a hit to the standard of living in the UK. It’s not fiscally in any way helpful, partly because you’ve then got some welfare benefits that are up rated in line with inflation. So it costs the government but doesn’t generate any more revenue. It’s pretty much bad whichever way you look at it, on households, and on the fiscal situation.”

Brent crude has now jumped by nearly 20pc in two days as the conflict threatens severe disruption in the Strait of Hormuz, a vital trade artery for a quarter of the world’s oil and a fifth of global liquefied natural gas exports.

As a result, investors sold off bonds as higher inflation threatened to eat away their returns, dashing hopes of any more Bank of England interest rate cuts.

It sent two year UK gilt yields, a proxy for the cost of short-term UK government borrowing, up at its sharpest pace in 10 months to 3.76pc. Yields rise when prices fall.

Mr Miles, a former Bank of England rate setter added that the first price rises at petrol forecourts were just “weeks away”.

The RAC has already warned that rising oil prices could add up to £10 to a full tank of fuel.

Household energy bills would rise more slowly, though Mr Miles warned that few parts of the economy would remain untouched by higher energy prices. He said this would hit jobs and wages and pile pressure on Ms Reeves to increase Whitehall budgets which are set in cash terms.

The market rout saw French and German stocks plunge by 3.5pc while Wall Street also saw heavy losses.

Economists at the left-leaning Resolution Foundation warned that increases in gilt yields since last Friday were expected to add around £4bn to the government’s borrowing bill if sustained.

Rohan Khanna, an analyst at Barclays, said investors “saw how large and persistent the inflation shock was” after Russia’s invasion of Ukraine in 2022, which sent energy prices soaring.

He added: “Investors are basically going back to the 2022 energy-shock template. That is very fresh in our minds.”

08:22pm

That’s all from us today. We’ll be back tomorrow to cover all the latest market reaction to the war in Iran and the Spring Statement. In the meantime, you can read our latest business and economic news here.

08:07pm

Stocks plunged around the world as the Middle East crisis deepened on Tuesday, stoking fears of a global energy crisis.

In the US, the benchmark S&P 500 pared back some early losses but was down by 0.8pc. The tech-heavy Nasdaq Composite fell by 0.87pc and the Dow Jones Industrial Average dropped 0.52pc.

07:59pm

Donald Trump said the US would cut off all trade with Spain because it refused to let America use its military bases to facilitate attacks on Iran.

The US president told reporters at the White House: “Spain has been terrible.

“We’re going to cut off all trade with Spain. We don’t want anything to do with Spain.”

Mr Trump said he had told Treasury Secretary Scott Bessent to “cut off all dealings” with Spain.

07:55pm

The conflict in Iran may have already wiped out £5bn from Rachel Reeves’s fiscal headroom, Deutsche Bank has warned.

Surging energy prices will bring higher inflation, higher welfare spending and lower growth which will all erode the margin by which the Chancellor can meet her fiscal rules, Deutsche’s chief UK economist Sanjay Raja wrote in a client note.

He said: “The world has changed - the energy price shock may warrant fiscal action.

“Like many forecasters, the fiscal watchdog will have done little to reflect the most global events. Energy prices have moved sizeably. Oil prices are up cumulatively over 15pc in the last two days. Gas prices are up nearly 70pc.

“A quick back of the envelope calculation looking at the recent commodity price moves would leave the Chancellor with more than £5bn less in headroom.”

This means the £23.6bn in headroom Ms Reeves announced on Tuesday could already be worth only £18.6bn.

An energy price shock will also bring pressure for Ms Reeves to announce measures to alleviate price rises on households and businesses, Mr Raja said.

This could push the Chancellor to further extend the fuel duty freeze or reinstate the Energy Price Guarantee that subsidised household energy bills, measures that would bring further strain on the public finances.

06:55pm

Iraq’s oil production is reportedly on the brink of collapsing by nearly three quarters as it has begun shutting down its largest oil fields.

Iraq has started closing down the Rumaila field, as well as the West Qurna 2 and Maysan fields, according to the Financial Times.

So far the cuts mean 700,000 bpd are being taken offline at Rumaila. At West Qurna and Maysan the cuts are 460,000 bpd and 325,000 bpd respectively.

Iraq has been forced to make these cuts because it has limited storage capacity and is increasingly unable to export its oil due to the closure of the Strait of Hormuz.

Iraq produces around 4m barrels per day or around 5pc of the world’s oil supply. The closures will mark a fresh threat to global oil supply as the crisis in the Middle East spreads.

06:13pm

Shares in banks plummeted on Tuesday as the sector is considered particularly exposed to Middle East risk.

HSBC dropped by 4.94pc on Tuesday, meaning it is now down by 9pc since Friday, before the US and Israel launched their attack.

Lloyds and NatWest slumped by 3.2pc and 2.46pc respectively. Barclays, which has also been hammered in recent weeks by fears over the private credit market, was down by a further 3.56pc.

The trend was seen across Europe with the European STOXX banks index down by 4.52pc to a three-month low.

06:07pm

Online travel agent Loveholidays is preparing to delay its plans for a public float following the outbreak of fighting in the Middle East.

The travel booking business, which sells holidays to places including Dubai and Abu Dhabi, is considering pushing back its float plans to later this year, due to concerns about the possible impacts of travel disruption and market turmoil.

Loveholidays, which was started in London in 2012, had been preparing to list on the London Stock Exchange this March, in what would have been one of the first major listings this year.

However, the holiday seller is considering postponing its float plans to later this year, after the conflict in the Middle East led to sharp drops in airline stocks and travel businesses including OnTheBeach.

Thousands of flights have been suspended across the Middle East in what has caused widespread travel disruption for hundreds of thousands of people.   

Loveholidays is working with advisors from Rothschild, Barclays, JPMorgan and Investec on its IPO plans. It is targeting a value of up to £1bn for the float.

05:50pm

European stocks plunged to more than a one-month low on Tuesday as the war in Iran rocked global markets.

The pan-European STOXX 600 plunged 3.1pc in its sharpest one-day fall since Donald Trump’s “Liberation Day” tariffs last April.

This means the index has now dropped about 5pc since its record high on Friday.

Germany’s DAX, which is heavily reliant on exports, plummeted 3.4pc to hit a three-month low.

Spain’s benchmark index plummeted 4.6pc to its lowest level since mid-December. The French CAC-40 dropped 3.46pc.

05:39pm

Rachel Reeves’s Spring Statement has left the UK economic outlook “highly exposed” to external shocks, Jefferies has warned.

Modupe Adegbembo, economist at the financial services firm, warned that the Chancellor’s measures delivered only a “marginal” improvement to Britain’s public finances, leaving the country wholly vulnerable to the blow from the war in Iran.

Ms Adegbembo said: “For the UK, the issue is not just higher prices per se, but the economy’s high sensitivity to energy shocks.

“With the public finances already on a weak footing, any sustained move higher in energy prices would materially add to existing strains.

“The exposure is significant.”

The UK’s electricity market is particularly vulnerable because of its marginal pricing mechanism, Ms Adegbembo warned.

This mechanism means the most expensive source required to meet demand (typically gas) sets the wholesale price for all electricity generation.

“With the energy mix still heavily skewed towards gas and oil, the pass‑through from higher wholesale prices is both direct and rapid.”

05:30pm

Iran’s visible exports have “effectively disappeared”, data company Windward has warned.

Just one vessel was recorded leaving Iran on Tuesday as the country’s ships vanished from transparent tracking systems.

Windward said this was a “significant deviation” from normal export behaviour.

The drop off suggests that Iran has either shut down its oil export operations or has shifted to dark activity to evade monitoring.

If Iran has halted production, it will mean even more pressure on global oil prices. Iran makes up around 4pc of global oil production.

05:26pm

The Office for Budget Responsibility (OBR) will review the impact of high tax rates in the UK over fears the current system may “distort or constrain economic activity”, writes James Baxter-Derrington.

As part of its economic and fiscal outlook that accompanied Tuesday’s Spring Statement, the OBR revealed that it would conduct “further analysis” of UK marginal tax rates over fears the system may impact “incentives to work, save and invest”.

Income tax alone is set to reach 11.9pc of total GDP by 2030-31, while increased National Insurance contributions will be as high as 6.8pc of GDP, overtaking VAT as the nation’s second largest tax receipt. In five years’ time, total public sector receipts will rise to an annual £1.6 trillion.

Despite Labour’s pledge not to raise taxes on working people, the increased personal tax burden accounts for more than 60pc of the higher tax take, mainly driven by the increase to employer National Insurance contributions and frozen tax thresholds.

Click here to read more...

05:15pm

The war in Iran meant OBR’s economic forecasts for the UK were “out of date before they were published”, Oxford Economics has warned.

Andrew Goodwin, chief UK economist at the consultancy, said the UK fiscal watchdog will soon have to cut its growth forecasts to reflect the toll of the conflict in the Middle East.

Mr Goodwin said: “The US-Iran conflict rendered the OBR’s short-term forecast out of date before it was published.

“The surge in oil and gas prices means GDP growth is likely to be weaker, and inflation higher, than the OBR forecasts this year.

“Although the OBR took on board the recent lower inward migration data and cut its medium-term forecast, its assumptions still look too high.

“We expect it will have to cut its growth forecasts and raise its borrowing projections over time.”

05:11pm

German Chancellor Friedrich Merz warned that the conflict in Iran is damaging the global economy.

Speaking to reporters in a meeting with Donald Trump at the White House, Mr Merz, said: “This is, of course, damaging our economies. This is true for the oil prices, and this is true for the gas prices as well.

“That’s the reason why we all hope that this war will come to an end as soon as possible. We are hoping that the Israeli and the American army are doing the right things to bring this to an end, to have really a new government in place.”

05:04pm

Rachel Reeves relied heavily on stability to defend the economic health of the country in her Spring Statement. But before she even reached the Dispatch Box, this was an outdated assumption.

According to the central forecasts offered by the Office for Budget Responsibility (OBR), the nation is on a relatively firm footing and is set to enjoy falling borrowing, inflation and interest rates, with an expanded fiscal headroom.

However, not one of these assumptions is based on the reality the country faces today, instead written based on what now look like fairytale numbers.

The Chancellor praised her increased £23.6bn headroom, but this figure would be more than wiped out by several changes that have already occurred.

Mattie Brignal, Alex Marsh and Rob White have more here

05:01pm

The number of commercial ships transiting the Strait of Hormuz plunged by 91pc Monday as the Iran conflict hammers global energy trade.

Just seven ships travelled through the narrow shipping channel yesterday, according to Windward.

This was down by 61pc compared to Sunday and was down 91pc compared to the seven-day average of 79 crossings.

Iran’s revolutionary guard declared that Hormuz was closed on Monday and that it would open fire on vessels attempting to travel through the narrow strait which transports a fifth of the world’s seaborne oil and gas.

Diversion flows around South Africa’s Cape of Good Hope more than doubled, surging by 112pc between Sunday and Monday.

Windward warned this indicates shipping companies are taking more long-term, structural decisions rather than temporary pauses.

Of the seven transits through Hormuz, four were outbound and three were inbound.

04:56pm

The FTSE 100 closed down 3pc in its worst day since Donald Trump launched his “Liberation Day” tariffs last April.

The UK’s benchmark index ended the day at 10,484.13 in a global sell-off triggered by worries that a Middle East energy crisis could damage growth.

The worst performer was testing and inspection company Intertek, which plunged 18.1pc.

The mid-cap FTSE 250 ended the day down 3.1pc at 22,688.75.

04:49pm

The Liberal Democrats have called on Sir Keir Starmer and Rachel Reeves to commit to spending 3pc of GDP on defence by 2030.

Sir Keir and Ms Reeves pledged last year that they would increase defence spending to 3.5pc by 2035. However, they have refused to put a timeline on increasing it to 3pc.

James McClearly, the Liberal Democrat defence spokesman, said: “Today’s Spring Statement has made it abundantly clear that this Labour Government have no clue on how to raise defence spending beyond 2.5pc.

“With continuing threats from an imperial Putin, and a new conflict in the Middle East at the hands of Trump and Netanyahu, the UK is far from being war-ready.

“The Government must urgently commit to reaching 3pc of GDP for defence spending by 2030 and start with the Liberal Democrat proposals for a £20bn defence bond programme.”

04:45pm

The war in Iran could mean “very, very large” impacts on the global economy, a top International Monetary Fund (IMF) official has warned.

Dan Katz, first deputy managing director at the fund, said: “This weekend, we had a significant escalation in the Gulf, and that certainly has the potential to be very impactful on the global economy across a range of metrics, whether it’s inflation, growth and so on.”

Speaking at the Milken Institute’s Future of Finance conference in DC, he said it is still too early to tell what the impact will be but that one key risk area is the potential blow to the energy market, which brings new inflation risks and the potential for higher interest rates.

“We’ve obviously seen a significant impact in the energy markets over the last 48 hours, with crude oil up materially, and then natural gas up even more. And that would be a very significant transmission channel into economies on a global basis,” he said.

Recent jumps in government bond yields on either side of the Atlantic likely reflects investors “potentially pricing in the chance of inflation as a result of higher energy costs that could provoke a monetary policy response,” he added.

“These are all big questions with potentially very, very large impacts on the global economy.”

04:37pm

Labour should have used the Spring Statement to scrap the windfall tax on oil and gas giants, the Tories have said.

Andrew Bowie, the shadow minister of state for energy, said Rachel Reeves had missed an opportunity to “reset the dial” on North Sea oil and gas following the outbreak of war in Iran.

Mr Bowie said: “Events in the Middle East over the past few days have shown domestic energy security to be crucial.

“So the complete black hole of activity toward ditching the Energy Profits Levy, even just making it easier for companies to operate from Britain, has shown this Government’s path will not change.

“Even when the levy runs dry, making pennies, Labour will be there to collect. But that’s a Keir Starmer Government for you.”

04:29pm

As the bombs fall across the Middle East, in Merry Old England everything is just tickety-boo. At least that’s what Rachel Reeves seems to think.

She ended her Spring Statement claiming Labour was delivering “a growing economy and more money in the pockets of working people”. I have no idea what world the Chancellor lives in, but it certainly isn’t this one.

From pensioners who have lost winter fuel payments to unemployed students watching their loans spiral out of reach and the workers paying for everyone else through ever more stealth taxes, I’m yet to meet a single person who feels better off.

The Office for Budget Responsibility’s (OBR) forecasts – the only real announcement made today – show that the economy is growing slower than it thought at the Budget in November. Previously, we expected GDP to hit the dizzying heights of 1.4pc in 2026. Now, the official forecaster thinks 1.1pc is more likely.

Sam Brodbeck: Reeves is showing how out of touch she is with reality

04:25pm

Reform UK has hired out an advert van with the slogan “Britain is broken” and a Photoshopped image of Rachel Reeves setting fire to bank notes.

Nigel Farage, the Reform leader, and Robert Jenrick, the party’s “shadow” chancellor, posed in front of the van on Tuesday afternoon:

Britain is broken. Britain needs Reform. @RobertJenrick pic.twitter.com/5YH56IqKG1

— Nigel Farage MP (@Nigel_Farage) March 3, 2026

04:17pm

The downturn in financial markets has raised doubts about whether inflation will fall back to the Bank of England’s 2pc target.

Stocks and bonds are falling heavily over concerns that a prolonged conflict in the Middle East will push up the cost of energy.

Traders have dramatically cut back bets on interest rate cuts as a result, delivering a further blow to stocks and overshadowing Rachel Reeves’s Spring Statement. The OBR forecast that inflation would fall back to the Bank’s 2pc target this year.

Thomas Watts, a portfolio manager at Julius Baer, said: “With inflation having dominated every Budget speech in recent years, it was both interesting and quietly reassuring to hear the OBR suggest that the UK is finally on course to return to its 2pc inflation target by late 2026.

“But the world has a way of moving faster than official forecasts. Events in the Middle East have already cast a shadow over the Chancellor’s optimistic narrative, raising doubts over how durable that inflation trajectory really is.

“Financial markets reacted quickly. Expectations for Bank of England rate cuts have been sharply rewritten, with investors now pricing in fewer than one cut this year, compared with more than two only a week ago, before the conflict escalated.

“In short, while the inflation outlook may be improving on paper, geopolitical risks are once again reminding us how fragile economic certainty can be.”

03:58pm

Stocks have fallen heavily in an “indiscriminate” sell-off that has spread to all corners of global markets.

Investors dumped shares in companies, bonds, bitcoin and even gold as they hunkered down over the prospect of an energy crisis triggering skyrocketing inflation.

“Whereas yesterday’s declines were focused on those businesses that faced the greatest impact, today’s is an indiscriminate risk-off move with all sectors in the red,” said Neil Veitch, investment director at River Global Investors.

Hervé Prettre of Edmond de Rothschild said Donald Trump’s decision to tell US citizens to evacuate the Middle East was a “game changer in a conflict that was supposed to remain aerial and limited to a few days”.

He added: “Stock and bond markets have reacted negatively due to the growing risk of inflation linked to rising oil prices, which could continue.”

03:49pm

Stock markets around the world plummeted as Donald Trump’s war in Iran triggered fears of an energy crisis.

The FTSE 100 plunged more than 3pc in its worst day since the US president’s “Liberation Day” tariff onslaught last April.

Losses were heavier in European markets as the price of oil and gas soared over concerns the conflict in the Middle East could choke off supplies.

Germany’s flagship Dax index sank by nearly 4pc while the Cac 40 in France dropped by 3.5pc.

The main stocks indexes on Wall Street also plummeted by 2.4pc.

03:31pm

Robert Jenrick shared a Photoshopped film poster to claim Rachel Reeves was “in La La Land” over the state of the economy.

Reform UK’s “shadow chancellor” referenced the 2016 Ryan Gosling and Emma Stone film as he denounced the Chancellor for not using her Spring Statement to cut taxes or bills.

Mr Jenrick said:

Taxes set to reach highest ever levels. Unemployment set to reach 10 year high. Growth downgraded.

What did we hear from Reeves today? Nothing.

Not a single measure to cut people's taxes and bills. Or help the millions of businesses on the brink.

She's in La La Land. pic.twitter.com/Y76fO2iuQa

— Robert Jenrick (@RobertJenrick) March 3, 2026

03:30pm

Sir Keir Starmer said he was aware of the “destabilising” impact of the Iran war on the British economy.

In a post on Substack, the blog and newsletter site, the Prime Minister claimed that the action he and Rachel Reeves had taken on the economy during their time in office had made the UK better able to respond.

Sir Keir said: “I know waking up to significant and fast-changing international news is destabilising. For the last few days, I’ve been in Downing Street focused our national security and the safety of British people and military personnel.

“But I wanted to write to you about the spring statement that Rachel Reeves delivered in the Parliament earlier today. Security and strength for our country starts with a strong economy – and a stronger economy puts us in a place to better withstand global tensions.

“The good news is, we are at a turning point in our economic plan. Inflation is down, energy bills and borrowing costs have fallen, productivity and business confidence is rising. This has all happened because of decisions, Labour decisions, that we have made.”

03:15pm

Landlords and second homeowners will pay £500m more in stamp duty than previously forecast, OBR figures show. In total, property owners will pay £17bn this year.

Commercial property sales boosted the forecast, as did an improved outlook for residential transactions.

OBR documents showed stamp duty receipts are on track to surge further to £28bn by 2030-31, “driven by rising forecast property transactions and house prices”.

It comes after the Chancellor raised the stamp duty surcharge on landlords and second homes from 3pc to 5pc in 2024 and ended a stamp duty break in April last year. The holiday reduced the threshold at which first-time buyers pay the levy from £425,000 to £300,000.

Industry experts have called on Ms Reeves to reform stamp duty and warned that the levy was freezing the housing market. Colleen Babcock, of property website Rightmove, said: “In its current form, stamp duty remains a major barrier to movement, which isn’t good for would-be buyers and sellers, or for the wider economy.”

03:11pm

Rachel Reeves told the Cabinet she had the “right” plan in an increasingly uncertain world.

Speaking at a meeting of Sir Keir Starmer’s top team this morning ahead of her Spring Statement, Ms Reeves noted both the conflict in the Middle East and its “potential impact on the wider global economy”.

A Downing Street spokesman said: “She said the government had the right economic plan to navigate global uncertainty – stability in public finances, investment in infrastructure and reform in the economy.”

The forecasts by the Office for Budget Responsibility (OBR) which accompanied the Spring Statement have already been rendered out of date by the war and subsequent global turmoil.

03:08pm

The budget watchdog admitted the outlook for inflation was “particularly uncertain” in light of the recent surges in oil and gas prices.

Professor David Miles, the acting co-head of the OBR, said there had been “very large increases particularly in gas prices and also in oil prices”.

The OBR expects inflation to fall back towards the Bank of England’s 2pc target during the course of this year “and be about at that level at the end of the year”.

He told a press conference: “What will happen to inflation is particularly uncertain in light of what’s happened in the last few days.”

02:59pm

Migration to Britain will fall by 60,000 per year between now and 2030, the Office for Budget Responsibility (OBR) has predicted.

The OBR said: “Reflecting this revision, we have lowered our central forecast for overall net inward migration by around 60,000 people (50,000 adults) a year on average.

“This is driven entirely by a more negative assumption for net migration by British nationals. By 2030, this change reduces the adult population by around 200,000 relative to the November forecast.”

The forecaster went on to say that the change in expected net migration would have “no impact” on GDP per person.

02:57pm

Stock markets on Wall Street plunged just as they have done in the UK and Europe over fears of an energy price crisis.

The Dow Jones Industrial Average dropped by 2.2pc to 47,829.56 while the S&P 500 declined by 2pc to 6,744.14.

The tech-heavy Nasdaq Composite was down 2.1pc to 22,270.69, although Wall Street was so far less affected than the FTSE 100 in London, which has fallen by 3pc.

The turmoil in stocks casts a worrying backdrop against the Chancellor’s Spring Statement, and the downgraded forecasts for the UK economy from the OBR.

02:50pm

The Government is on track to miss its target to build 1.5 million homes by the end of the current Parliament, the economic forecaster has said .

The Office for Budget Responsibility (OBR) predicted net additions to Britain’s housing stock would fall from the recent average of 260,000 to a low of 220,000 in 2026-27.

New homes will then rise sharply as a result of planning reforms introduced by Angela Rayner, the former housing secretary, and Steve Reed, her successor, with more than 305,000 a year.

The OBR said: “Compared to November, stronger out-turn and near-term indicators boost the forecast slightly in the short term, but it is broadly unchanged in the medium term.

“This leaves cumulative UK net additions between 2025-26 and 2029-30 at 1.3 million, around 30,000 higher than in November.”

02:37pm

The economic forecaster has questioned whether the Labour Government’s new reforms to support children with special educational needs and disabilities (Send) will actually save money.

The Government had projected that the number of people getting new Education, Health and Care Plans (EHCPs) would slow between now and 2029 then fall from there.

EHCPs are legal documents that entitle children with special educational needs to appropriate treatment. The Government is proposing a wider system of support, with less emphasis on EHCPs.

However, the Office for Budget Responsibility (OBR) has raised doubts about whether the savings that are most likely to be associated with fewer children getting these legal documents will come to pass.

One line in the OBR document reads: “Government has not set out specifically how the reforms will deliver this or provided estimates of any related cost savings.

“Previous changes to the eligibility for public spending programmes, such as the replacement of disability living allowance with personal independence payment for extra-cost disability benefits, did not achieve the savings planned.”

In other words: Do not guarantee the savings ministers hope to see in a few years’ time will actually come about.

02:31pm

Rachel Reeves’s Spring Statement was a missed opportunity, Labour’s largest trade union backer has said.

Sharon Graham, the general secretary of Unite and a staunch critic of Sir Keir Starmer’s Government, said Ms Reeves’s address had been a chance “to back workers, to commit to our public services and British industry”.

Ms Graham said: “Britain needs a Labour vision, one that understands the deep cost of living crisis that is crippling families.

“This cost of living crisis is an everyday reality, and workers need immediate change that they can touch and feel, not numbers on a spreadsheet.

“If this Government is going to reconnect with everyday people in Britain, it needs to stop the performative statements, roll up its sleeves and back Britain. Britain is hurting and we need action now.”

02:28pm

The British economy could face a “very significant” hit from the war in Iran, the financial watchdog has warned.

The Office for Budget Responsibility said in its report accompanying the Spring Statement that its forecast “lies in the middle” of a wide range of outcomes at a time when the Middle East conflict continues to spiral.

The OBR report said: “The central forecast lies in the middle of a wide range of possible outcomes. There are significant risks around it, with plausible outcomes both substantially above and below the central projection.

“Conflict in the Middle East, which escalated as we were finalising this document, could have very significant impacts on the global and UK economies.”

The OBR added: “It is wholly unanticipated shocks that can have the most significant negative effects.”

02:25pm

Welfare spending is to rise by almost six per cent this year, Britain’s financial watchdog has found.

The Office for Budget Responsibility said overall welfare spend is set to increase by £18bn this year to £333bn, the equivalent to 10.9 per cent of GDP.

Welfare expenditure will then rise by an average of £15bn during the rest of the forecast period, reaching £407bn, or 11.2 per cent of GDP, by 2030-31. This would be 1.2 per cent higher than its level before the pandemic.

The OBR added: “The main drivers of the projected increase in welfare spending over the forecast are higher spending on pensioner and health-related benefits.”

02:19pm

Investors will pay an extra £5bn a year in capital gains tax by 2030-2031, the Office of Budget Responsibility (OBR) said.

At its forecast in November, the OBR said that capital gains tax would raise £29.8bn by 2031. This has now been revised upwards to £34.9bn – an increase of £5.1bn.

It comes after more capital gains tax was paid during the month of January than for any year since 2005, Government figures revealed.

Investors paid a record £17bn, an increase of 44 per cent year-on-year and the highest receipts for January since 2023.

At the 2024 Budget, Ms Reeves raised the main rates of capital gains tax from 10 per cent to 18 per cent for basic rate taxpayers, and from 20 per cent to 24 per cent for higher rate taxpayers. She also stripped back relief offered to those selling companies or shares.

The annual tax-free allowance for investors has been dramatically cut, from £12,300 in 2022-2023 to just £3,000 today.

02:06pm

Rachel Reeves had boasted during her speech about growth per person rising by 5.6pc over the Parliament.

This would leave people £1,000 a year better off by the next election, the Chancellor said.

However, the OBR highlights that if living standards had grown as they did prior to the financial crisis, Britons would be roughly £15,000 richer.

02:04pm

With bombs raining down on British air bases, gilt yields soaring, oil and gas prices rocketing, millions of businesses on the brink and families suffering, we now know what the Chancellor has to offer the people of this country: nothing, writes Robert Jenrick.

Nothing to boost growth, which was downgraded again today. Nothing to cut people’s bills. And nothing to bring back well-paid jobs.

I wrote in The Telegraph last week that if the Spring Statement passed us by with nothing but a few tweaks, the Chancellor would effectively be waving the white flag, surrendering us to economic decline.

And decline is exactly what she has chosen today. She came to Parliament without a single policy to arrest our economic slump. It was an admission from the Chancellor that she was out of ideas and authority.

Robert Jenrick: This Spring Statement did nothing to boost growth

02:00pm

A DUP MP forgot to put his phone on silent during Sir Mel Stride’s response to Rachel Reeves, meaning his tinny ringtone blared out in the chamber interrupting the shadow chancellor.

Sammy Wilson, the MP for East Antrim, was left red faced as he struggled to figure out how to turn his phone off.

The shadow chancellor attempted to carry on before the speaker Sir Lindsay Hoyle intervened and gave Mr Wilson a telling off.

Mr Wilson was clearly not too impressed with Sir Mel’s speech. He spent the next two minutes on his phone attempting to hide the fact he was texting underneath his notepad.

01:56pm

Unemployment is expected to peak at 1.9 million this year.

That’s 400,000 more people out of work compared to when Labour took office.

The Treasury may claim that’s because more people are moving from inactivity to looking for work. However, the number of Britons who are economically inactive for health reasons has remained stubbornly high at 2.8m for the past two years.

All this contributes to a rising welfare bill, which the OBR has revised up for every year of its five-year forecast.

Spending on health and disability benefits is expected to hit £110bn by the start of the next decade, with the bulk of that spent on adults of working age.

01:55pm

The Office for Budget Responsibility document suggests the “uncertain” situation in Iran means that Rachel Reeves could need to raise defence spending.

The OBR said: “The uncertain current geopolitical situation creates the risk that further increases to defence spending will be necessary over the Spending Review period, and the Government has stated that it is committed to fulfilling the requirements of the Strategic Defence Review (including the Defence Investment Plan).

“Ramping up defence spending to reach the 3.5 per cent of GDP target by 2035 on a linear path, rather than the path implied in the Spending Review, would imply an additional 0.2 per cent of GDP (£6bn) in the final year of the Spending Review period.”

01:53pm

A million pensioners will be dragged into paying income tax because of frozen thresholds, the OBR document reveals.

For the first time, the state pension will rise above the amount that someone is able to get income without paying tax.

The OBR has forecasted that 600,000 pensioners will be dragged into paying tax by 2026/27. That will rise to 1 million in 2030/31.

The OBR document does add “much of this population is projected to pay only very small additional amounts of tax due to the freezes”.

01:52pm

Robert Jenrick urged Rachel Reeves to cancel a planned increase in fuel duty that will take effect in September.

Speaking in his new role as Reform UK’s “shadow chancellor”, Mr Jenrick compared his opposite number to a “rogue landlord” whose property had descended into ruin.

Mr Jenrick continued: “The next scheme that the Chancellor has to raise taxes on working people is to hike fuel duty at the pumps. Will she cancel it, will she give some relief for care workers, for white van men, for hard-working people who get up early in the morning and drive to work and are the backbone of their economy?”

Ms Reeves joked that Mr Jenrick’s new position was neither the first nor second job that he had wanted in a reference to his former ambition to become Tory leader.

She continued: “It might have been a couple of weeks ago but the Right Honourable gentleman used to be in a party that was going to get rid of the fuel duty support just three months after losing office. That was in the plans we inherited and we scrapped them.”

Ms Reeves’s decision in late 2024 to keep fuel duty steady at 52.95p per litre resulted in a £3bn loss in revenue for the Treasury.

01:50pm

Rachel Reeves attempted to build to a late crescendo to her speech but her backbenches were so flat, the end of her address came as quite a surprise to many.

Sir Keir Starmer gave her an encouraging smile and put his arm around her while some loyal MPs were quick to make some noise to let the Chancellor know they were there.

She could have done with more of their support while giving her speech.

Sir Mel Stride, the shadow Chancellor, could read the mood music. He stood up and declared: “Is that it?” to jeers that immediately drowned out any Labour MPs.

01:45pm

Rachel Reeves kept on taking swipes at Reform UK in her Spring Statement, which was telling.

She mocked Nigel Farage, the Reform leader, for not being present for the address. She has repeatedly joked about how many former Tories have joined Reform.

Ms Reeves said at one point of Reform and its Tory links: “The same people, the same policies and the same disastrous outcomes for working people.”

High-profile defectors to Mr Farage’s party have included Robert Jenrick, who until January was Kemi Badenoch’s shadow justice secretary, and Nadhim Zahawi, a former chancellor under Boris Johnson.

The Chancellor also argued Reform wants to move the UK closer to Russia. The repeated political attacks speak to Labour’s nervousness about Reform’s popularity. Mr Farage’s party has topped opinion polls for 11 months now.

01:44pm

Rachel Reeves offered a glimmer of hope to the UK’s beleaguered North Sea oil and gas operators during her speech.

She said: “Tomorrow, I will meet with our North Sea industry leaders to discuss the implications that they face and work with them to manage this uncertain period.”

The companies, which operate 280 or so oil and gas fields in UK waters, have been hit hard by Ed Miliband’s drilling ban and her own 78pc windfall tax. Many have shut facilities and cut investment.

She gave no details but those issues will dominate the agenda of any meeting – and her mention of it suggests some potential for relaxing of Labour squeeze on fossil fuels.

Her comments come hour after US president Donald Trump urged Sir Keir Starmer to ramp up production in the North Sea.

The price of oil and gas has surged this week in response to the war in Iran, with Brent crude surpassing $85 a barrel for the first time since July 2024 and European gas prices rocketing by more than 75pc.

01:44pm

Hidden in Rachel Reeves’s Spring Statement is a reference to something that could be much more significant for the shape of the British economy than this response to forecasts.

The Chancellor talked about a speech she will give later this month that will spell out her latest thinking about how to trigger stronger economic growth. That speech, unlike today’s one, is expected to include policy changes.

Ms Reeves will give a second Mais lecture later in March which will update her thinking after the address she gave to the same gathering of economists when Labour was in opposition.

The Chancellor suggested she would unveil plans for getting closer to the European Union at the speech, talking about plans for “breaking down barriers” with Europe.

Ms Reeves also said the speech would include help for young people. That sounds to me like a hint that changes to tuition loans repayments – now being worked up behind the scenes – could be unveiled then.

That speech, being dubbed the “growth speech” in the Treasury, is the one that could have a more direct impact on the lives of Britons than today’s big picture rhetoric.

01:42pm

A senior Conservative MP accused Rachel Reeves of “gaslighting the British people” on defence spending.

Dame Caroline Dinenage, the MP for Gosport, contrasted the Labour Government’s military strategy with the rapidly increasing conflict in the Middle East.

Dame Caroline said: “At a time when the world has never felt unstable, every corner of our Armed Forces is currently being asked to find cuts.

“This is the first year since the 1980s that we haven’t had a ship in the Gulf at a time when the Middle East is a tinderbox. She’s gaslighting the British people. This is a disaster, this is a disaster for our defence, it’s a disaster for our Armed Forces. When is she going to face reality?”

Ms Reeves responded by insisting Labour was spending more on defence than the previous Tory government, and she had done more than any other chancellor to increase defence spend.

“I won’t take any lessons, frankly, from the party opposite when we are increasing defensive spending and they oversaw a cut,” she said.

01:38pm

Rachel Reeves’s pledge to cut energy bills for households will “ring hollow” because of market turmoil caused by the war in Iran, Sir Jeremy Hunt has warned.

The former Tory chancellor said events in the Middle East meant that “her Budget promise to reduce household energy bills by £150 is going to ring hollow for many people”.

Sir Jeremy continued: “If cost of living is the real concern, isn’t the real mistake to increase taxes by £66 billion? And if that money’s needed for public services, nearly all of that, £54 billion, could be got by reducing the welfare bill to 2019 levels.

“So it is sustainable to keep raising taxes on people in work in order to pay ever more benefits to people not in work?”

Ms Reeves said she had “huge respect” for Sir Jeremy but claimed he had left a “huge black hole in the public finances”. She went on to say it was “rich” to demand welfare cuts when the Tories oversaw a significant rise in the benefits budget.

01:30pm

The Liberal Democrats have demanded that Rachel Reeves move closer to the European Union in the coming months.

Warning that Britain was “paying the price for two anti-growth Labour Budgets”, Daisy Cooper, the Liberal Democrats’ Treasury spokesman, said the cost of living crisis was “pushing people and businesses to the brink”.

Ms Cooper told Rachel Reeves: “We are pleading with the Chancellor. Please, for the sake of our country, put a laser-like focus on getting a better trade and defence deal with Europe so we can protect our country, get Britain growing again and end the cost of living crisis.”

Responding to the Lib Dems’ demand, Ms Reeves said: “That is exactly what the Government are doing. We have taken action as the Honourable Lady knows.”

There was laughter in the Commons chamber when Ms Cooper declared “graduates are being ripped off”.

The Liberal Democrats notoriously broke their own pledge not to raise tuition fees while in coalition with the Tories from 2010 to 2015. Ms Cooper later said it was a “plague on all of our houses”.

01:26pm

Britain’s economy is in “real trouble” and the “out of touch” Chancellor is “deluded”, according to Telegraph readers.

Here is a selection of some of your views after the Spring Statement and you can join the debate here:

01:24pm

Rachel Reeves vowed she would ensure that economic growth was felt all across Britain.

Responding to Dame Meg Hillier, the chairman of the Treasury select committee, the Chancellor promised that growth would “benefit everybody, not just a small few”.

Ms Reeves said: “The biggest change that we can make is ensuring that growth takes place in all parts of the country, rather than just a few people in a few parts of Britain.”

Dame Meg had drawn a contrast between Tuesday’s more muted Spring Statement and the flurry of leaks and briefings that preceded Ms Reeves’s second Budget in November and prompted calls for the Chancellor to resign.

The senior Labour backbencher said: “I welcome today’s forecast partly because there’s been so little speculation along the way, which I’m sure the Chancellor, the markets and the public and businesses welcome. That’s the stability and confidence that we need to see.”

01:19pm

Rachel Reeves mocked Sir Mel Stride following his response to her Spring Statement.

The Chancellor referred to Kemi Badenoch’s stinging response to the Budget in November as she told Sir Mel: “I know that the OBR didn’t publish their forecast until I sat down but I still think he could have done a little bit better than that.

“To be honest, I was hoping that the leader of the Opposition was going to respond today, and after that performance I expect she does too.”

Mrs Badenoch’s spirited speech in Nov 2025 was widely seen by her supporters as a turning point in her leadership of the Tory Party.

Ms Reeves told Sir Mel that he had 14 years to set out Tory economic policy, adding: “Today’s performance is yet another reminder of how irrelevant the Conservative Party now is ... [They] have been wrong about the economy time and time again.”

01:16pm

Sir Mel Stride called on Rachel Reeves to resign as he concluded his response to the Spring Statement.

The shadow chancellor said: “For the hard-working people in our country crushed by taxes, by those denied employment, by the farmers and the family business owners who have suffered in fear for too long.

“For every hollowed-out high street, for every young person robbed of their future, for every elderly person struggling to survive, for the generations yet to come, we say: go!”

01:14pm

This was a hugely underpowered Spring Statement.

Reeves trying to talk up unimpressive economic indicators, and avoided talking about unemployment levels completely.@MelJStride was right when he started his speech by saying "Is that it?"

— James Cleverly???????? (@JamesCleverly) March 3, 2026

01:13pm

Sir Mel Stride quoted Wes Streeting’s private remarks about Rachel Reeves as he railed against the Chancellor.

In a WhatsApp message sent by the Health Secretary to Lord Mandelson, the disgraced former US ambassador, he claimed there had been “no growth strategy at all”. Mr Streeting later said he had been proven wrong about the comments when he published the message last month.

Sir Mel said: “The truth is that she has no plan, or as her Health Secretary said, there is ‘no growth strategy at all’.

“And even if she did have a plan she would be too weak to deliver it. The psychodramas swirling round No 10, the almost daily scandals visiting the door of our Prime Minister. The sight of our once person at the highest level within the diplomatic service being carted away in a car by the police, and backbenchers calling the shots.

“The Chancellor’s credibility has gone. The Prime Minister’s chief of staff has gone. His Cabinet Secretary has gone but somehow the Chancellor hangs on. But through the chaotic fog, the drums are drawing ever closer. The British people deserve so much better.”

01:10pm

Sir Mel Stride led Tory MPs in chants of “up!” during his stinging criticisms of Rachel Reeves’s economic record.

The shadow chancellor accused Ms Reeves of being out of touch with reality.

Sir Mel said: “Her message today is that her so-called plan is working. But what is the reality? Inflation, up! Borrowing, up! Spending, up! Tax, up! Welfare, up! Unemployment, up!

“All of this speaks to the weakness and chaos of this Government. Is it any wonder that her so-called plan is not working? We have some of the highest energy costs in the world and yet she doubles down on net zero.”

Sir Mel said Ms Reeves’s top priority must be to get rid of taxes on North Sea oil and gas.

01:08pm

Rachel Reeves has delivered a Spring Statement based on “deeply outdated” forecasts, a think tank has warned.

The Adam Smith Institute (ASI) said the Chancellor’s fiscal update would not survive contact with the “unpredictable” war in Iran.

Joanna Marchong, head of communications at the ASI, said: “The Chancellor has convinced herself of economic stability based on deeply outdated forecasts. It is a statement written by spin doctors, not economists.

“After last year’s autumn Budget, Reeves needed to show that those sacrifices were not in vain and deliver growth. OBR forecasts, even though they don’t reflect current shocks, appear to show her rules are just about intact, but growth is lacklustre and the UK is far from credible.

“Markets are wobbling, and while the Spring Statement coincides with the unpredictable nature of war in the Middle East, this makes it even more vital that Reeves reforms the very anti-growth, anti-business measures she has introduced.”

01:06pm

The Conservatives demanded Rachel Reeves set out how she could increase defence spending to 3 per cent in light of the conflict in Iran.

Sir Mel Stride, the shadow chancellor, said Ms Reeves had “quite rightly” mentioned the war in the Middle East and wider threats facing Britain.

Sir Mel said: “Could she explain in a moment how she is going to fund what we have been urging her to do, to go to 3 per cent of GDP on defence by the end of this Parliament? How will she fund that?”

The Labour Government has committed to eventually raising defence spending to 3 per cent of GDP. However, it has refused to make this vow during the current Parliament.

01:02pm

Labour has “given up” on the British people, Sir Mel Stride said, as he likened Rachel Reeves to “a fiscal twister ripping up everything in its path”.

The shadow chancellor responded to his opposite number’s Spring Statement speech by asking: “Is that it?”

Sir Mel said: “What utter complacency. A Chancellor in denial. She speaks of stability. What planet is the Right Honourable lady on?

“She has lurched from putting up taxes to destroying growth to destroying headroom to coming back to putting up more taxes, more growth destroyed. Round and round we go, like a fiscal twister ripping up everything in its path.”

Going on to call Ms Reeves “weak”, Sir Mel said: “Let it be remembered that at this time in this chamber, this weak and chaotic Government gave up on the British people. This is not a Spring Statement, this is a surrender statement.”

01:00pm

This is a Spring Statement written by Chat-GPT…

— Kemi Badenoch (@KemiBadenoch) March 3, 2026

12:59pm

Rachel Reeves insisted her plan was the “right one” in a defiant conclusion to her Spring Statement speech.

The Chancellor said: “My plan is the right one. I am in no doubt about how great the rewards can be if we stay the course. The forecasts today confirm that the choices this government has made are the right ones.

“Stability in our public finances, interest rates and inflation falling, living standards rising, more children lifted out of poverty, more appointments in our NHS, more investment in our infrastructure, a growing economy, and more money in the pockets of working people.

“Mr Speaker, these are the right choices, this is the right plan, and I commend this statement to the House.”

12:58pm

Slow growth at the end of last year means the OBR has cut its forecast for UK growth this year to 1.1pc, down from a prediction of 1.5pc in November.

However, sluggishness today will largely be followed by faster growth tomorrow as the economy catches up, growing by 1.6pc in 2027 and 2028, compared with previous projections of 1.5pc in both years.

Ms Reeves does not reveal the watchdog’s forecast for unemployment. However, her admission that joblessness will peak “later this year” suggests it will rise closer to 2 million than the Chancellor likes.

Unemployment stood at 1.88m at the end of last year.

12:58pm

Rachel Reeves said new forecasts showed that the Government was set to reduce borrowing by almost £18bn more than predicted in the autumn.

The Chancellor told MPs that Britain was set to borrow less than the G7 average, “something the Tories never achieved in 14 years”.

The Office for Budget Responsibility forecast shows that public sector net borrowing is set to fall from 4.3 per cent this year to 3.6 per cent next year, reaching 1.8 per cent by 2029-30.

Ms Reeves said: “I have never accepted that we have to choose between social justice and fiscal responsibility, because there is nothing progressive, nothing Labour, about spending over £100bn a year. That’s one in every £10 of public money on servicing debt racked up by the Tories.”

12:55pm

Rachel Reeves has warned that surging energy prices linked to the Gulf conflict will put upward pressure on inflation.

Citing her budget cuts in energy bills, she said: “In the current global context, with the risk that rising energy prices will put upward pressure on inflation, the action that I have taken is even more crucial.

“Keeping inflation low and stable is the best way to support family incomes and reduce pressures on the cost of living.”

12:55pm

The Chancellor denounced Reform UK as a “Tory tribute act” as she dedicated large parts of her speech to denouncing Nigel Farage’s party and the Conservatives.

Rachel Reeves said the Tories had left her to inherit a £22bn black hole in the public finances, a figure that has been contested by leading economists and the Office for Budget Responsibility.

In a swipe at Reform, Ms Reeves continued: “Make no mistake, the Tory tribute act over there would do exactly the same thing.

“They may have changed the colour of their rosettes. But the British people won’t forget that they are the same people who wrecked our public services and wrecked our public finances in the Tory government.”

Ms Reeves went on to accuse Reform of planning to “side with Russia”, adding that Zack Polanski’s insurgent Green Party wanted to “take us out of Nato and jeopardise our alliances”.

Earlier today, a shock YouGov poll showed Labour behind both Reform and the Greens, with Sir Keir Starmer’s party tied with the Tories in third.

12:54pm

Shadow business secretary Andrew Grifith told The Telegraph: “More gaslighting than Victorian London!

“The Chancellor is living in a fantasy world where unemployment isn’t rising and growth isn’t being downgraded.”

12:52pm

Rachel Reeves said Britons being able to manage their bills and afford a home and a holiday was “never too much to ask”.

Saying she was committed to unlocking opportunity “in every part of Britain”, Ms Reeves added that she came into politics because she believed in a Government that “stands up for working people”.

The Chancellor said she believed that “everyone – no matter where they grow up – deserves security and their fair chance to achieve their potential”.

She added: “Being able to manage the bills, afford a home and pay for a holiday is never too much to ask. When governments lose control of the economy – as the Tories did - it is working people who pay the price, in their pay packets, in their bills and in their mortgages.”

Ms Reeves said the Tories inflicted higher bills on working people through austerity, Brexit and Liz Truss’s mini-Budget, which she added was “cheered on” by Kemi Badenoch, the Tory leader, and Nigel Farage, the Reform UK leader.

12:51pm

Labour’s backbenches might be full but there are plenty of stony faces listening to Ms Reeves’s speech. The Chancellor has framed her Spring Statement around the idea of “sticking to the plan” – but it’s not clear how many MPs are happy with the current plan.

It’s clear she is going to have to spend the next hour winning some of them over.

The loudest jeers so far come from the opposition benches who took great pleasure in laughing at Ms Reeves when she opened her speech by saying: “Mr Speaker, this government has the right economic plan for our country.”

12:50pm

The economy will grow at a slower pace than previously forecast this year, Rachel Reeves has admitted in her Spring Statement.

The Chancellor said that the Office for Budget Responsibility (OBR) had predicted that GDP would expand by 1.1 per cent in 2026. This was lower than its previous estimate for growth of 1.4 per cent.

Ms Reeves blamed lower net migration for the forecast. She said: “Today, the Office for Budget Responsibility has updated its growth forecasts, including reflecting lower net migration.

“Average growth across the forecast period is largely unchanged. While the OBR has adjusted the profile of GDP so that it grows slightly slower in 2026, and faster in 2027 and 2028.

“GDP is forecast to grow by 1.1 per cent in 2026, 1.6 per cent in both 2027 and 2028, and 1.5 per cent in both 2029 and 2030. And GDP per capita is set to grow more than was expected in the Autumn, with growth of 5.6 per cent over the Parliament.”

12:48pm

Rachel Reeves hailed the Government’s abolition of the two-child benefit cap as a “moral” choice.

The Chancellor listed a number of Labour policies that had been introduced including 30 hours of free childcare for working families and free breakfast clubs at primary schools.

Turning to the lifting of the two-child limit, which had prevented parents from claiming Universal Credit for a third child, Ms Reeves said: “That is the moral choice ... The Tories have said they would reinstate that destructive policy and now Reform are saying exactly the same thing.

“Two parties united in their intention to plunge nearly half a million children back into poverty in a single stroke. If you import failed Tory politicians, you get failed Tory policies too.

“Labour and only Labour has the right economic plan for families and for our country.”

12:47pm

Rachel Reeves cited forecasts by the economic watchdog which predict inflation will fall despite the threat to global supplies of oil and gas from the war in Iran.

The Chancellor told MPs that economic stability was “the single most important precondition” for growing the economy.

She said: “That is why we have committed to a single major fiscal event each year, limiting major policy changes to the Budget and giving businesses and households the certainty they need. Today, the new forecasts from the Office for Budget Responsibility confirm that our plan is the right one.”

Ms Reeves added: “In February, the Bank of England confirmed that inflation will fall faster because of the action that I took at the Budget. And today, the Office for Budget Responsibility expects inflation to come down even faster than it forecast in the Autumn.”

The price of wholesale gas in Europe rocketed by as much as 48 per cent on Tuesday because of war in the Middle East, a day after rising by 40 per cent.

12:43pm

The Chancellor accepted she had a “responsibility” to change Britain as she hit out at the Tories’ record in office and claimed Labour had “restored economic stability”.

Rachel Reeves told MPs: “The previous government let inflation skyrocket to over 11 per cent, stoked interest rates to 15-year highs and delivered the first Parliament on record where people were poorer at the end than they were at the start.”

Inflation rose to more than 11 per cent in the wake of Russia’s illegal full-scale invasion of Ukraine. By the time of the last general election in July 2024, the Tories under Rishi Sunak had reduced inflation back to two per cent.

Ms Reeves acknowledged that Labour had campaigned on a promise of “change” at the last election. She added: “I understand the responsibility on me to deliver that change.

“I know that the question people will ask themselves at the next general election is this: ‘Are me and my family better off?’ I am determined that the answer will be yes.”

12:41pm

Rachel Reeves said she was “proud” to have overseen a significant increase in defence spending.

Ms Reeves told the Commons: “In an increasingly dangerous world, I am proud to be the Chancellor that is delivering the biggest sustained increase in defence spending since the Cold War.”

Ms Reeves said she had committed £650m in January to upgrade fighter jets, as well as pointing to a £1bn helicopter deal with Leonardo that was struck on Thursday.

She continued: “I am in no doubt about Britain’s ability to navigate the challenges we face. The plan that I have been driving forward since the election is the right one – stability in our public finances, investment in our infrastructure and reform to Britain’s economy.”

12:38pm

Rachel Reeves said her plan for the economy was “even more important” in the wake of the war in Iran.

The Chancellor is now on her feet in the Commons after being called by Sir Lindsay Hoyle, the Commons Speaker.

After a boisterous reception from both Labour and opposition MPs, Ms Reeves said: “This Government has the right economic plan for our country, a plan that is even more important in a world that in the last few days has become yet more uncertain with unfolding conflict in Iran and the Middle East.

“It is incumbent on me and on this Government to chart a course through that uncertainty, to secure our economy against shocks and protect families from the turbulence that we see beyond our borders.”

Ms Reeves thanked British troops and said she was in contact with her international counterparts, the Bank of England and maritime and North Sea industry leaders.

12:27pm

12:24pm

Every prime minister takes office promising to get a grip on net migration.

Lord Cameron vowed to reduce it from “hundreds of thousands” to “tens of thousands” in 2010, a pledge his successor Baroness May stuck with until the bitter end.

Boris Johnson promised net migration of no more than 250,000 in 2019, while Rishi Sunak said he would deliver the biggest-ever cut to the number of people arriving to live in the UK.

All failed spectacularly, with the figure peaking at a record 944,000 in the year to March 2023.

That makes it all the more remarkable that Sir Keir Starmer might be the one to succeed where his Tory predecessors failed.

Eir Nolsøe: Much lower migrant numbers would cost Treasury billions

12:23pm

The cost of government borrowing has surged hours before Rachel Reeves delivers her Spring Statement.

Bond yields, the return governments promise to buyers of their debt, have rocketed around the world over fears that the Iran war will choke off supplies of oil and gas.

The yield on two-year UK gilts, as the bonds are known, rose at the fastest pace since August 2024 on Tuesday to 3.81pc. The yields had closed at 3.51pc on Friday.

The benchmark 10-year gilt yield also surged to 4.52pc in response to the impending energy shock. It was the biggest jump in 10 months, having been below 4.38pc just a day earlier.

Investors are worried that surging energy prices will reignite inflation around the world and make it harder for the Bank of England to cut interest rates.

It left the FTSE 100 down 2.7pc on Tuesday on its worst day since markets were in the grip of Donald Trump’s “Liberation Day” tariff onslaught last April.

The price of wholesale gas in Europe surged by as much as 48pc on Tuesday, a day after rocketing by 40pc.

Brent crude oil, the international benchmark, surpassed $85 for the first time since July 2024, with some analysts warning that prices could hit $100 if the conflict drags on.

It threatens to undermine Rachel Reeves’s Spring Statement in the Commons later, where she will say she has brought “stability in the public finances”.

Ms Reeves will tell MPs: “This government has the right economic plan for our country… in a world that has become yet more uncertain.

“Stability in the public finances, investment in infrastructure and reform to our economy.

“Building growth not on the contribution of a few people or a few parts of the country, but in every part of Britain with a state that doesn’t stand back, but steps up.”

12:14pm

Rachel Reeves has left 11 Downing Street to deliver her Spring Statement in 15 minutes’ time.

The Chancellor, who is wearing a light blue suit, smiled as she stood outside No 11.

Ms Reeves will be speaking in the Commons from 12.30pm. You can follow all of the action on this live blog and join the conversation in the comments section.

12:10pm

Airlines around the world are still suspending flights as the US and Israeli war against Iran escalates.

More than 12,300 flights have been cancelled over safety fears since the start of the conflict, according to Flightradar24.

Thousands of passengers have been left unable to complete their journeys, with the turmoil sending airline stocks plunging across the globe.

Companies will also face surging fuel costs after Brent crude oil jumped 20pc to its highest level since July 2024 following the outbreak of war.

The FTSE 100 was down 2.7pc, with British Airways owner IAG down 6.6pc, Wizz Air down 4.7pc and easyJet down 4.3pc.

Qantas Airways chief executive Vanessa Hudson said the airline had “pretty good” fuel hedging in place but the spike in oil prices was significant for the industry.

The Australian airline’s shares fell for a second day, closing down 1.8pc.

12:08pm

City traders have slashed bets on interest rate cuts as surging energy prices threaten to trigger a jump in inflation.

The odds of the Bank of England reducing rates from 3.75pc to 3.5pc later this month have tumbled from almost 90pc a week ago to just 15pc on Tuesday.

Investors have dramatically shifted their bets following a surge in energy prices caused by US-Israeli military action on Iran.

Oil has risen from $70 a barrel last week to more than $82 while the price of natural gas has risen more than 90pc since the start of the war to a three-year high.

12:05pm

The Chancellor has been warned she must focus on bringing down Britain’s “unsustainably high” national debt as war continues to rage across the Middle East.

Rachel Reeves must use the Spring Statement as a starting point for setting out a more credible medium-term financial plan, the National Institute of Economic and Social Research (Niesr) said.

David Aikman, the director of Niesr, argued there was an “immediate risk” of a renewed energy shock because war in Iran had pushed up oil and gas prices while disrupting shipping routes.

“If it persists, it will raise household bills and business costs in the months ahead, putting renewed upward pressure on inflation and potentially interest rates,” Mr Aikman said.

“That uncertainty underlines why fiscal policy needs further consolidation. With debt still unsustainably high, the priority for the Chancellor should be to build a credible medium-term plan to put the public finances on a more resilient path, with debt falling as a share of the economy over time.”

11:56am

Rachel Reeves is “assailed on all sides” and must urgently make the case for growth, a leading economist has said.

Paul Johnson, a former director of the Institute for Fiscal Studies think tank, said the Chancellor “desperately needs to make a positive case” at the Spring Statement in just over half an hour’s time.

Writing in The Times, Mr Johnson said: “She is assailed on all sides. High taxes are already squeezing household incomes. Yet her current policy is to continue to raise them.

“She and the Prime Minister talk incessantly of the cost of living. Yet in truth their levers are limited, and current policy seems to be to raise costs as 2030, the year the next general election is due, approaches: the recent reduction in energy bills, paid for by the taxpayer, is due to run out in 2029.”

Mr Johnson said the best solution for Ms Reeves would be to achieve “much improved economic growth”, but emphasised that this was “much easier said than done”.

He added: “If Reeves is going to do anything beyond presenting OBR forecasts on Tuesday, then I hope that it is to reiterate a focus on growth, and hopefully to present some new strategies for achieving it.”

11:38am

The cost of a barrel of oil has surpassed $85 for the first time since July 2024 risking a surge in petrol prices just as Rachel Reeves prepares to deliver her Spring Statement.

Brent crude has surged by 20pc since Friday as the war in the Middle East threatens to disrupt global supplies of oil and gas through the Strait of Hormuz on the Iranian coast.

It threatens to push up the price of petrol just as the Chancellor prepares to lay out official forecasts which she will say show her economic plan is working.

11:38am

Rachel Reeves has insisted her economic plan is “the right one for Britain” as she prepares to deliver her second Spring Statement.

Ahead of addressing the Commons at 12.30pm, Ms Reeves said on X:

My economic plan is the right one for Britain.

Today will set out how we are cutting the cost of living, cutting borrowing and growing the economy.

— Rachel Reeves (@RachelReevesMP) March 3, 2026

Unsurprisingly, the Tories reacted with some scepticism to the Chancellor’s claims amid rising 10-year gilt yields.

Responding to Ms Reeves, Andrew Griffith, the shadow business secretary, said: “You are raising borrowing, and choking the economy with tax rises.”

11:28am

In a blow to mortgage holders, traders are wagering just a 15pc chance of an interest rate cut by the Bank of England this month following the surge in oil and gas prices.

Money markets show a sharp decline in the odds of policymakers lowering borrowing costs at their next meeting, down from 86pc on Friday.

Traders are also only pricing in one more rate cut this year from 3.75pc to 3.5pc, down from two last week.

Fewer rate cuts means mortgage borrowing costs will fall more slowly, hampering Chancellor Rachel Reeves’s mission to bring down the cost of living.

Traders are betting that an energy price shock will risk fuelling inflation, preventing central banks around the world from cutting rates.

Sanjay Raja, chief UK economist at Deutsche Bank, said rising oil prices “would raise inflation and dampen growth”.

He added: “Should energy prices stick at current levels, we would expect rate cuts to slow.”

He still expects the Bank of England to cut rates twice this year.

11:00am

The Spring Statement will include crucial forecasts from the Office for Budget Responsibility on the outlook for inflation.

Rachel Reeves will be feeling confident she will receive some good numbers after the Bank of England forecast a drop in consumer prices to its 2pc target by April – although events in the Middle East may lead to accusations that those predictions have been undermined.

Meanwhile, over in the eurozone, inflation climbed to 1.9pc in February, which was higher than market expectations that it would remain at last month’s pace of 1.7pc.

The increase, driven by food prices and services costs, will douse any hopes that the European Central Bank might cut interest rates to spur Europe’s flagging economy.

Inflation now looks set to surpass the ECB’s target of 2pc in coming months, as the Iran war sends oil and gas prices soaring.

Capital Economics analyst Jack Allen-Reynolds said that if oil and gas prices remain at current levels, that will add 0.5 percentage points to the bloc’s inflation rate.

“If energy prices remain high, it seems unlikely that the Bank would cut interest rates this year as we have been forecasting,” he said.

If the conflict drags on, the ECB might even have to raise interest rates. That would stifle economies such as Germany, Italy and France, which are only just emerging from a slowdown.

Euro area #inflation expected to be at 1.9% in February 2026, up from 1.7% in January 2026. Components: services +3.4%, food, alcohol & tobacco +2.6%, other goods +0.7%, energy -3.2% - flash estimate https://t.co/1cvae5N3rB pic.twitter.com/GKAP7zJLau

— EU_Eurostat (@EU_Eurostat) March 3, 2026

10:48am

Rachel Reeves’s Spring Statement will be a battle of narratives, between the fuzzy optimism of the Chancellor’s portrayal of the economy and the hard numbers from the forecaster.

Given Ms Reeves has made the decision not to make taxation and spending announcements, the focus will be on the numbers: growth, wages, employment, prices.

The Chancellor’s speech has been framed around the idea of “sticking to the plan”, with Ms Reeves due to argue there are signs of economic improvement since her tax-raising first two Budgets.

Falling borrowing costs – linked to the lowering interest rate – and reductions in inflation will see her argue the conditions for better economic growth are emerging.

But the numbers in the weighty document produced by the Office for Budget Responsibility (OBR) will tell a more complicated picture.

Unemployment forecasts will be up for this year. Predictions for growth – Sir Keir Starmer’s “number one priority” for office – will be closely watched.

The Tories will frame Ms Reeves as a jobs killer. They have linked difficult employment figures to her employers’ National Insurance rise in 2024 and the new workers’ rights package.

More widely, you get the feeling from the Treasury that they would be very happy for the Spring Statement to attract as little media attention as possible.

After the furore of the Budget in November and all the speculation it attracted in the run-up, Ms Reeves has opted this spring for a quieter life.

10:40am

Darren Jones has admitted that the surge in oil and gas prices would have “some impact” on the cost of living.

The Chief Secretary to the Prime Minister said “international events can obviously affect the UK economy” as images began to emerge of motorists queuing for fuel at petrol forecourts.

“There’s probably going to be some impact,” he told Sky News.

“There’s no question about that. We don’t know what that is.

“But I think in the Spring Forecast later, what the Chancellor will be able to show is that our plan is working in terms of a stable approach to the UK economy that, in a world where there’s lots of things happening, is a very attractive economy for investors and businesses.”

Asked if he was concerned about rising petrol prices, he said that one of the reasons the Prime Minister had consented to British air bases being used by the US in the Iran conflict was to “get this over as quickly as possible”.

“Because the sooner it’s over, the lesser the impact will be on our economy and the global economy.”

10:36am

The Chancellor will not relish giving her Spring Statement against a backdrop of a sell-off on Britain’s stock market – but the picture is much worse in Europe.

The Dax in Germany, the largest economy on the Continent, has plunged 3.4pc while the Cac 40 in Paris has dropped by 2.8pc.

European stocks overall are heading for their biggest two-day drop since Donald Trump announced his “Liberation Day” tariffs last April.

The UK’s FTSE 100 was down 2.7pc.

Peter Doherty, head of investment research at Arbuthnot Latham, said it was “faring better that European peers, likely a function of its higher weighting to the energy sector”.

He said: “Key question marks will be the duration of the conflict and its ultimate impact on inflation and growth dynamics, with overriding concerns that spiking energy prices will end up with a high potential for a reversal of recent interest rate cuts impacting growth.

“We would caution that at present the growth and inflation impact should be relatively benign should a resolution be relatively swift, the prevailing backdrop remaining constructive from a growth perspective.”

10:16am

Darren Jones rejected suggestions that the UK’s limited involvement in Iran was because Sir Keir Starmer was “pandering to Muslim voters”.

Rachel Reeves will deliver her Spring Statement later against a backdrop of war in the Middle East and increasing strain in Britain’s relationship with the US.

“We’re obviously in discussions with the Americans about their operations, but the key point is, we are not militarily involved in the wider conflict in the Middle East, we are involved in a very discreet and narrow way to defend British interests, British citizens and British armed forces,” Mr Jones told BBC Radio 4’s Today programme.

It was put to him that Donald Trump seems to believe this is because the Government is pandering to Muslim voters in Britain, to which he replied: “That’s just, that’s not right.

“The UK will act in the interests of British citizens, regardless of their faith or where they are in the United Kingdom.

“I think the public would rightly say they don’t want to be involved in a wider war in the Middle East, but they would expect us to do whatever we can to defend British citizens.”

It was put to him that some supporters may want the Government to show the courage to speak out against Mr Trump’s course of action, to which he replied: “Look, we will do what we need to do to protect British citizens and British interests.

“We obviously have conversations with the Americans and with other regional partners. We have been working closely with President Macron and Chancellor Merz in France and Germany, as well as closely with our regional allies in the Middle East, but our first and foremost priority is to defend British citizens.”

10:02am

Borrowing costs across Europe have surged as the Continent is much more vulnerable to an energy price shock, a bond trader has warned.

Sonal Desai, chief investment officer at Franklin Templeton, said the rise in oil and gas prices would hit inflation expectations, making it less likely that there will be interest rate cuts from Federal Reserve, European Central Bank or Bank of England.

As a result, bond yields have climbed. The UK 10-year gilt yield rose sharply to more than 4.5pc, with the yield on 10-year French bonds up from 3.29pc to 3.39pc and Italy up from 3.35pc to 3.47pc.

The rises are more than double the pace of increases to borrowing costs in the US, where the 10-year Treasury bond yield was up to 4.09pc.

Mr Desai said this posed “risks to global growth” the longer the conflict goes, although he does not expect a global recession.

He said: “Russia’s invasion of Ukraine pushed crude oil prices above US$100 per barrel for about three months and tripled gas prices, but the global economy proved resilient—and for the moment this remains my baseline.

“Much like in 2022, however, Europe appears much more vulnerable, and the United States conversely should prove more resilient than the rest of the world economy.”

09:49am

The boss of Britain’s largest manufacturing association has urged ministers to tackle “hideously high” energy costs, hours before Rachel Reeves delivers her spring statement.

Manufacturers have gathered down the road from Parliament this morning for the annual conference of Make UK, an industry body.

Stephen Phipson, the group’s chief executive, described energy prices as “one of the most existential threats” factories were currently facing.

He pointed to the Government’s plans to subsidise electricity costs from 2027 but warned the scheme was set to arrive too late amid “arguing” by Whitehall departments.

Official figures revealed last year showed that Britain has the highest industrial electricity price of any developed country.

Mr Phipson warned: “If you’ve got the highest in the world, it stifles economic growth.”

His remarks come as the US war with Iran and Tehran’s strikes on surrounding oil and gas producing countries have sent prices surging, raising fears of a fresh energy crisis.

09:36am

The price of oil is heaping further pressure on the Chancellor as she prepares to set out her Spring Statement in the Commons later.

Brent crude has climbed 5.5pc to more than $82 a barrel as the Iran war threatens to squeeze off supplies through the vital Strait of Hormuz. Iran’s Revolutionary Guards said last night they would close the trade route.

Jordan Rochester, executive director at Mizuho Bank, said: “This is a logistics crisis as much as it is a war – a terms of trade shock with 20pc of global energy supply unable to leave the region, even if temporarily.”

He added: “We can argue about how long it will last but the truth is we don’t know, and markets will need to price in the tail risk of a longer disruption.

“We’re currently in Day 4 of this conflict. Last year it was a 12-day war, and that was relatively simple.

“If regime change is high on the list of objectives, that takes time to even attempt, and the conflict will have a long impact on the cost of energy logistics in the region – shipping premiums would take time to adjust even if the kinetic action dies down.

“What if it’s like the Red Sea and random disgruntled IRGC unit strikes continue to threaten shipping even if a ceasefire is in discussion? At a minimum that is a scenario longer than 12 days for global shipping companies to consider.”

09:21am

Britain’s stock markets plummeted in the lead-up to Rachel Reeves’s Spring Statement as companies braced for higher energy prices.

The FTSE 100 sank by 2.2pc on its worst day since markets were in the grip of Donald Trump’s “Liberation Day” tariff onslaught last April.

The domestically focused FTSE 250 was down 2.3pc as investors lost confidence.

Susannah Streeter, an analyst at Wealth Club, said the FTSE 100 had “fallen deeper into the red as the war widens and companies assess the impact of severe disruption across the region on their operations”.

She said: “Airline stocks have sunk further, as the cost of aviation fuel looks set to rise, key routes remain closed, and travellers’ confidence takes a significant hit.”

08:55am

The yield Britain’s benchmark government bond surged further as markets were gripped by inflation fears.

The 10-year gilt yield jumped more than 10 basis points to 4.47pc as the surge in energy prices over concerns that the energy shock would wipe out returns in the bond market.

The yield on bonds rises as the prices falls. Prices fall when investors sell bonds.

Jim Reid, an analyst at Deutsche Bank, said: “Unsurprisingly, the sharp moves in commodities drove a significant spike in sovereign bond yields.”

08:39am

The Bank of England is no longer likely to deliver an interest rate cut this month, money markets suggest in the wake of the energy price shock gripping the world.

Traders have slashed bets on a reduction in borrowing costs at the March meeting of policymakers at the Bank, pulling down the odds from 86pc on Friday to just 20pc.

It comes as traders prepare for a spike in inflation as the closure of oil and gas refineries in the Middle East push up energy prices.

It leaves the Governor of the Bank of England, Andrew Bailey, in a difficult position, after he suggested last month that interest rates would fall during the course of this year.

Policymakers held the Bank Rate at 3.75pc in February.

08:24am

The cost of government borrowing has surged hours before the Chancellor will deliver her Spring Statement.

Bond yields, the return governments promise to buyers of their debt, have surged around the world over fears that the Iran war will lead to an energy price shock that will fuel inflation.

The yield on two-year UK gilts jumped more than 10 basis points to 3.74pc as trading began on Tuesday. They had closed at 3.51pc on Friday.

It threatens to undermine Rachel Reeves’s Spring Statement in the Commons later, where she will say she has brought “stability in the public finances”.

The yield on 10-year UK gilts rose eight basis points to 4.46pc.

Ms Reeves will tell MPs: “This government has the right economic plan for our country … in a world that has become yet more uncertain.

“Stability in the public finances, investment in infrastructure and reform to our economy.

“Building growth not on the contribution of a few people or a few parts of the country, but in every part of Britain with a state that doesn’t stand back, but steps up.”

08:10am

The FTSE 100 dropped sharply at the open as the war in Iran entered its fourth day.

The UK’s benchmark stock index was down 1.1pc to 10,660.77 as soaring energy prices risk blowing a whole in company profits.

It could also undermine Rachel Reeves’s claims to have restored stability as she prepares to deliver her Spring Statement.

The domestically focused FTSE 250 dropped even further, declining by 1.3pc to 23,120.22.

07:54am

Wholesale gas prices have soared further after Iran’s Revolutionary Guards said they would close the vital Strait of Hormuz.

Europe’s benchmark contract rocketed higher by another 25pc at the start of trading to €55 per megawatt hour, having leapt by 40pc on Monday. Prices were near €30 last week.

The surge in energy prices puts further pressure on Chancellor Rachel Reeves as she prepares to deliver the Spring Statement.

An energy shock risks pushing up inflation, which would erode consumer purchasing power, threatening growth and undermining Labour’s pledge to tackle the cost of living.

07:47am

The Iran war looks set to put pressure on public finances across Britain and Europe just as things were coming under control.

Eurozone government borrowing costs rose further at the start of trading on bond markets as ​the air ‌war in the Middle East entered its fourth day.

The conflict has pushed up the price of energy, raising concerns that economies could be hit by a fresh wave of inflation.

Germany’s 10-year bond yield, the benchmark for the single currency bloc, rose five basis points in the first 30 minutes of trading ‌to ‌2.76pc. It rose ⁠5.5 basis points on Monday, its biggest one-day gain in nearly three months.

The eurozone imports ⁠the bulk of its oil and gas, and Brent crude rose 3.3pc to more than $80 a barrel on Tuesday. Benchmark ​European wholesale gas prices ‌closed nearly 40pc higher on Monday.

If sustained, that would send inflation in the currency block higher, and ‌put pressure ​on the ⁠European Central Bank (ECB) to raise interest rates, which have remained at 2pc since June last year.

While the ECB looks ⁠set to remain ​on hold in the coming months, markets had seen ​around a 40pc chance of ‌a rate cut by year ​end. Now they ​see around a ⁠25pc ⁠chance of an interest rate rise this year.

Italy’s 10-year yield rose further, up nearly six basis points to 3.41pc. UK bond markets open shortly.

07:38am

Rachel Reeves has been urged to scrap a planned increase in fuel duty as the price of oil soars.

The Chancellor, who will deliver her Spring Statement later today, announced last year that the long-held discount in fuel duty would be scrapped from September.

However, she has been urged to abandon the planned 1p rise, which would be followed by two increases of 2p each in subsequent years, following the outbreak of conflict in the Middle East.

Brent crude, the international benchmark, tipped back above $80 a barrel overnight and some analysts have warned that prices could hit $100 if the conflict drags on.

SNP economy spokesman Dave Doogan said: “With real fears that prices at the pump are now set to soar because of the situation in the Middle East - instead of stubbornly doubling down, the Chancellor needs to scrap her price hike plans before motorists face a devastating double hit.

“Oil prices are already spiking - the last thing motorists and businesses now need is another damaging tax hike from the Labour Party.”

07:29am

Donald Trump told Sir Keir Starmer to reopen the North Sea to combat soaring energy prices as his conflict in Iran enters a fourth day.

The US president urged the Prime Minister to ramp up oil and gas production as prices soar in response to the conflict in the Middle East.

Brent crude, the international benchmark, was up as much as 3.5pc in the early hours on Tuesday, tipping back above $80 a barrel over growing fears that global supplies of oil and gas will be hit.

Rising oil and gas prices threaten to fuel inflation, just as Chancellor Rachel Reeves prepares to deliver her Spring Statement on the health of the nation’s finances.

Asked what advice he would give the Prime Minister, Mr Trump told The Sun: “Two very simple things.

“Open up the North Sea. Immediately.

“Your energy prices are through the roof.

“And stop people from coming in from foreign lands who hate you.

“Open up the North Sea and stop people from pouring into his country from faraway lands.”

07:18am

The pound dropped against the dollar for a second day as the Iran war sent investors seeking out safe havens from the market turmoil.

Sterling was down 0.3pc versus the US currency to $1.335, with the dollar also rising against the euro and the yen.

It presents a troubling backdrop for Chancellor Rachel Reeves as she prepares to deliver her Spring Statement later today.

06:59am

The head of the UK’s largest owner of petrol station forecourts has criticised the Government’s shift away from oil and gas production in the North Sea as energy prices soar.

Alasdair Locke, chairman of  Motor Fuel Group, said motorists would face higher prices at the pump “in the coming days and weeks” as the impact of the conflict in the Middle East filters through.

Brent crude oil has jumped from as low as $70 on Friday to more than $80 today amid increasing concerns about threats to the global supply chain.

“What it does rather highlight is the absurdity of a lot of our current energy policy, particularly with relation to energy security,” Mr Locke told BBC Radio 4’s Today programme.

“The fact that Qatar cannot produce and now export gas – and we import an awful lot of gas from Qatar – why on earth are we shutting down our own production in the North Sea on the alter of net zero?

“We all know that we need oil and gas in this country in the mix for decades to come.”

06:40am

Thanks for joining me. Oil rose for a third day in a row as Iran’s Revolutionary Guards said they would close the vital Strait of Hormuz.

Brent crude, the international benchmark, was up as much as 3.5pc to tip back above $80 a barrel over growing fears that global supplies of oil and gas will be hit.

About ‌20pc of the world’s oil and gas passes through the Strait of Hormuz, a waterway between the Persian Gulf and the Gulf of Oman, flanked by Iran on one side and the UAE on the other.

Iranian media reported on Monday that a senior Iranian Revolutionary Guards official said the Strait of Hormuz is closed and ​warned Iran will fire on any ship trying to pass.

Donald Trump said the US will do “whatever it takes” to achieve its military objectives in Iran.

The dollar and gold edged further upwards as investors sought out safe havens from the market turmoil, which sent stocks sharply lower in Asia overnight.

Analysts from DBS said the conflict raises “the spectre of stagflation”.

“While energy prices are nowhere close to the levels seen during the start of the Russia-Ukraine conflict in 2022, investors will probably be keeping a close eye on the extent and duration that ​energy supplies will be disrupted,” they said.

The turmoil has overshadowed Rachel Reeves’s preparations to update the nation on the health of Britain’s finances in her Spring Statement later today. Here is what you need to know.

1) Easter flights to Australia to jump £400 as Middle East airports shut | Fares could rise by up to 40pc with long-haul travellers rushing to book early

2) Rachel Reeves to water down minimum wage increase for young workers | Chancellor to backtrack on abolishing ‘discriminatory age bands’ as she prepares to unveil spring forecast

3) Unemployment set to hit 10-year high | Chancellor to declare she has ‘right economic plan’ in Spring Statement as joblessness figure expected to near 1.9 million

4) Netflix boss: I carry anxiety about the outcome and where we landed | Job loss fears raised in first interview since historic Hollywood takeover battle

5) Gas price surge threatens to send household bills soaring | Analysts warn that a prolonged war in the Middle East could send family energy costs rising to £2,500

Asian shares plunged again and oil prices surged as the Iran war threatened energy supplies.

Shares in South Korea sank more than 7pc as markets reopened after a holiday on Monday.

It came as Brent crude, the international oil standard, added $1.89 to $79.63 a barrel over worries that the Iran war could clog the global flow of crude.

Japan’s benchmark Nikkei 225 sank 3.3pc to 56,155.54. Like other resource-poor countries in Asia, Japan could be especially hit by the lack of access to the Strait of Hormuz since much of its oil and natural gas is shipped through there.

However, analysts say Japan has a sizable stockpile lasting more than 200 days and so the threat is not immediate.

In the rest of the region, Australia’s S&P/ASX 200 lost 1.3pc to 9,077.30, while Hong Kong’s Hang Seng shed 1.1pc to 25,771.51 and the Shanghai Composite index lost 1.5pc to 4,118.37.

Stocks of airlines, including American Airlines, United and Delta, were some of Monday’s biggest losers on Wall Street. Higher oil prices threaten their already big fuel bills, the fighting in the Middle East also has closed airports and left travelers stranded.

The losses cascaded in Asia. ANA was stock down 2.4pc, Japan Airlines fell 5.2pc, Korean Air declined 8.9pc and Qantas Airways lost 2.9pc.

US stock markets largely recovered from early losses on Monday as rises in defence, energy and tech stocks offset drops in other sectors.

The Dow Jones Industrial Average fell 0.2pc, the S&P 500 gained 0.04pc and the Nasdaq Composite rose by 0.4pc.

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