Introduction: Reeves to respond to spring forecast after oil and gas prices surge
Good morning.
“Events, dear boy, events”. Rachel Reeves may have the (probably apocryphal, oft-quoted) wisdom of Harold Macmillan in mind today, as she responds to the latest official assessment of the UK economy.
The Office for Budget Responsibility’s new Spring Forecast could, in happier times, have brought the chancellor good news this afternoon.
Economists predict they will show that the UK is still keeping within the OBR’s fiscal forecasts – helped by a record budget surplus in January – and that inflation is heading down towards target.
However, the Middle East crisis mean such predictions are out of date before they’re even published, as the world faces the threat of a new energy crisis.
Yesterday, liquefied natural gas (LNG) prices rocked by over 40%, and oil rose by over 7%, after Qatar’s state-run energy firm halted LNG production and Saudi Arabia temporarily shutting down some units of its massive Ras Tanura oil refinery following attacks by Iran.
These moves, as the US-Israel war on Iran rages, risk reigniting the cost-of-living crisis.
As economists at Investec explain:
The main economic consequence of higher energy prices would be to boost inflation.
In the UK, illustratively, the current level of the oil price would, if maintained, add about 0.2%pts to headline inflation via higher petrol prices; and a sustained 40% shift up in natural gas price futures would boost this by a further 0.7%pts or so, via higher household utility bills.
We’re not expecting major policy changes today, as the government has committed to holding just one major fiscal event each year in the autumn. That’s why it’s billed as the ‘spring forecast’ not the ‘spring statement’.
Instead the chancellor is expected to insist the government has the “right economic plan for the country” in a “yet more uncertain” world.
Reeves is expected to tell MPs:
“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.”
The agenda
-
8am GMT: Worldpanel supermarket inflation and sales figures
-
9.30am GMT: ONS data: Mergers and Acquisitions involving UK companies: October to December 2025
-
10am GMT: Flash estimate of eurozone inflation in February
-
12.30pm GMT: spring forecast statement from Chancellor Rachel Reeves
-
1pm GMT (roughly): Office for Budget Responsibility’s spring forecasts published
-
2.30pm GMT: Office for Budget Responsibility press conference
Key events
FTSE 100 sheds 1% as European markets fall again
European stock markets have opened with fresh falls, as the Middle East crisis continues to grip bourses around the region.
In London the FTSE 100 share index has dropped by 104 points, or almost 1%, to 10,667 points at the start of trading, a one-week low.
Insurance group Prudential (-3.5%) are the top fallers, followed by precious metals producer Fresnillo (-3.6%), and mining giants Antofagasta (-3.5%) and Anglo American and (-3.2%).
There are only seven risers on the index, including energy producers BP (+1.6%) and Shell (+0.35%).
Derren Nathan, head of equity research at Hargreaves Lansdown, says:
Sentiment towards BP and Shell has strengthened significantly off the back of oil price spikes. But it’s a complex picture. Neither company has production in Iran. But BP’s significant production in Iraq and Abu Dhabi risks being bottlenecked through disruption to the Strait of Hormuz. For Shell the same applies to its LNG facilities in Qatar and the Emirates. If a moderate sustainable regime is established in Iran, there is the potential for substantial derisking, and for prices to be rebased downwards. If sanctions are removed, it also opens the door for investment into Iranian oil fields.
But uncertainty remains high. This could prove to be highly profitable for both Shell and BP’s trading arms with Shell’s optimisation capabilities in LNG transit likely to be in particularly strong demand. Shell’s balance sheet strength also leaves it better placed to deal with any prolonged volatility and while BP’s buybacks remain on pause, we’re expecting Shell’s generous payouts are likely to continue this year.
Germany’s DAX index has fallen by 1.75%, Spain’s IBEX lost 1.4% at the open and France’s CAC 40 is down by 1.25%.
Julia Kollewe
Heathrow boss Thomas Woldbye received a total pay package of £3.8m last year – up 14% from £3.3m in 2024, despite the controversy around his handling of the power outage at the airport in March that messed up the travel plans of 200,000 passengers.
Or rather non-handling, as he was fast asleep, leaving Heathrow’s chief operating officer Javier Echave to deal with the outage, after a fire at a nearby substation knocked out power supplies to the airport.
Woldbye later expressed his “deep regret” at being uncontactable and sleeping through the crisis The outage at Europe’s busiest airport has raised questions over the resilience of the UK’s ageing national infrastructure.
A Heathrow-commissioned inquiry run by former transport secretary Ruth Kelly found Woldbye was not woken by emergency notification alerts and several calls from Heathrow’s chief operating officer because his mobile had gone into silent mode “without him being aware” and he described it as a “technical glitch”. Asked at a later event in Westminster if he had since obtained “an extra loud phone,” Woldbye replied: “Oh, absolutely. And more.”
The company’s annual report shows his annual bonus rose to £1.4m from £1.3m last year, while long-term share bonuses bonuses increased to £1.3m from £1.1m. His salary was also raised, to £850,000 from £775,000. His benefits including a cash travel allowance climbed by 16% to £130,977 and pension contributions were up 4.7% to £87,006.
UK gas price contract soars again
UK gas prices are climbing – adding to the risks of an inflation spike.
The month-ahead UK gas futures contract, for delivery in April, is up 18% this morning at 135.5p per therm, following a 40% jump on Monday
That’s the highest since February 2025, and almost twice as high as its level in the middle of last month.
However, it’s still much lower than in the early days of the Russia-Ukraine war in 2022, when the month-ahead gas price briefly rose over 500p/therm.
The pound is weakening again this morning too, approaching lows seen during yesterday’s volatile trading.
Sterling is down two-thirds of a cent, or 0.5%, at $1.3342 against the US dollar, which is up against a basket of other currencies too.
Oil rising again
The oil price is rising again this morning, as the Middle East crisis threatens energy supplies.
Brent crude, the international benchmark, is up 3.2% at $80.24 a barrel, adding to Monday’s 7.2% rise.
There is ongoing confusion over the status of navigation in the strait of Hormuz after a general in Iran’s Revolutionary Guards threatened to “burn any ship” seeking to navigate the waterway, a vital route for oil and gas shipments.
But US Central Command said the strait – through which a fifth of global oil and gas travel – was not closed, according to Fox News.
However, leading maritime insurers have cancelled war risk cover for vessels operating in the Gulf, driving up freight costs and deterring shipping companies from sailing through the strait.
Rachel Reeves’s plans could be hit by Middle East conflict, say economists
Heather Stewart
Soaring global energy prices as a result of the widening Middle East conflict will jeopardise Rachel Reeves’s plan to conquer inflation and rekindle growth, economists have warned as she prepares to deliver her spring forecast later today.
Responding to the latest projections from the independent Office for Budget Responsibility (OBR), the chancellor will insist she has “the right economic plan for our country, in a world that has become more uncertain”.
The new forecasts are expected to show the public finances moving in the right direction, with the £22bn fiscal buffer she left herself against her fiscal rules in the November budget little changed.
However, experts said the OBR projections could soon look out of date, if Monday’s surge in oil and gas prices proves long-lasting.
Asia-Pacific shares drop again
Asia-Pacific stock markets have fallen again today, as the Middle East crisis continues to alarm investors.
In Tokyo, the Nikkei 225 index has fallen by 3%, while China’s CSI 300 index is down 1.5%.
In South Korea, where the stock market was closed yesterday, the KOSPI index has tumbled by almost 8%.
Ipek Ozkardeskaya, senior analyst at Swissquote, says:
Geopolitical risks are rising – not easing. Volatility is increasing alongside trade and geopolitical uncertainty, and the risk of renewed inflation could tighten global financial conditions.
ECB’s top economist: Lengthy Iran war could cause inflation ‘spike’
The European Central Bank’s chief economist has warned that a prolonged war in the Middle East and a persistent fall in oil and gas supplies from the region could cause a “substantial spike” in inflation.
Philip Lane has told the Financial Times said that “directionally, a jump in energy prices puts upward pressure on inflation, especially in the near term.”
Lane said the impact would depend “on the breadth and duration of the conflict”, adding:
“The impact would be amplified if it also gave rise to a repricing of risk in financial markets”.
Introduction: Reeves to respond to spring forecast after oil and gas prices surge
Good morning.
“Events, dear boy, events”. Rachel Reeves may have the (probably apocryphal, oft-quoted) wisdom of Harold Macmillan in mind today, as she responds to the latest official assessment of the UK economy.
The Office for Budget Responsibility’s new Spring Forecast could, in happier times, have brought the chancellor good news this afternoon.
Economists predict they will show that the UK is still keeping within the OBR’s fiscal forecasts – helped by a record budget surplus in January – and that inflation is heading down towards target.
However, the Middle East crisis mean such predictions are out of date before they’re even published, as the world faces the threat of a new energy crisis.
Yesterday, liquefied natural gas (LNG) prices rocked by over 40%, and oil rose by over 7%, after Qatar’s state-run energy firm halted LNG production and Saudi Arabia temporarily shutting down some units of its massive Ras Tanura oil refinery following attacks by Iran.
These moves, as the US-Israel war on Iran rages, risk reigniting the cost-of-living crisis.
As economists at Investec explain:
The main economic consequence of higher energy prices would be to boost inflation.
In the UK, illustratively, the current level of the oil price would, if maintained, add about 0.2%pts to headline inflation via higher petrol prices; and a sustained 40% shift up in natural gas price futures would boost this by a further 0.7%pts or so, via higher household utility bills.
We’re not expecting major policy changes today, as the government has committed to holding just one major fiscal event each year in the autumn. That’s why it’s billed as the ‘spring forecast’ not the ‘spring statement’.
Instead the chancellor is expected to insist the government has the “right economic plan for the country” in a “yet more uncertain” world.
Reeves is expected to tell MPs:
“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.”
The agenda
-
8am GMT: Worldpanel supermarket inflation and sales figures
-
9.30am GMT: ONS data: Mergers and Acquisitions involving UK companies: October to December 2025
-
10am GMT: Flash estimate of eurozone inflation in February
-
12.30pm GMT: spring forecast statement from Chancellor Rachel Reeves
-
1pm GMT (roughly): Office for Budget Responsibility’s spring forecasts published
-
2.30pm GMT: Office for Budget Responsibility press conference
