Reeves to press 'right economic plan' as energy shock threatens inflation

London awaits the chancellor's spring forecast as the economy faces a fresh energy shock. The latest forecast from the Office for Budget Responsibility is expected to show the UK economy still within its projections, helped by a record budget surplus in January. Yet a Middle East energy crisis threatens to upend that improvement and push up living costs.

Markets are already reacting. LNG prices have jumped more than 40% after Qatar halted LNG production, while Saudi Arabia temporarily shut parts of its Ras Tanura refinery following attacks linked to Iran. Oil prices rose by more than 7%, feeding fears that higher energy bills could follow for households and businesses.

Economists warn that the main economic consequence of higher energy costs would be higher inflation. If oil and gas stay elevated, headline inflation could rise by around 0.2 percentage points from oil and a further 0.7 points from increased household energy bills, complicating the task of keeping prices on target.

With the government sticking to one major fiscal event each year in autumn, the chancellor is expected to insist the government has the 'right economic plan for the country' in a world that is getting increasingly uncertain. No major policy changes are anticipated in the spring forecast moment, but the message is clear: energy prices are the wild card.

Beyond the numbers, households and markets will be watching how the government navigates this delicate balance between supporting growth and keeping inflation in check as energy markets remain volatile and global tensions persist.

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