13 March 2026: Starmer admits Mandelson’s appointment was a ‘mistake’

Rachel Reeves has stated it is “certainly not good for the British economy to have trade disrupted” due to the Middle East crisis. The Chancellor indicated that the Government might be prepared to intervene to assist with energy costs if the conflict escalates.

Appearing before Parliament’s Treasury Committee, Reeves said it would be “unwise to speculate” about the impact of the Iran war on UK inflation, growth, or interest rates, but added that the Treasury is “modelling several scenarios.”

Threats from Tehran continue to hinder shipping through the Strait of Hormuz, a crucial route for oil and gas supplies. According to the UK Maritime Trade Operations Centre, run by the British military, three commercial ships were hit by missiles in the Strait in separate incidents on Wednesday morning. One attack off the Oman coast set a vessel ablaze.

The Bank of England is now widely expected to keep interest rates steady at 3.75% when its Monetary Policy Committee meets next week, as the escalating conflict in the Middle East disrupts the UK's inflation outlook and forces policymakers to abandon plans for further cuts.

As recently as two weeks ago, a March rate cut seemed almost certain, with some expecting two cuts this year as inflation cools and was on track to hit the Bank's 2% target by early spring.

That scenario has changed dramatically, with rate futures indicating about a 50/50 chance of one rate hike this year.

Surging oil and natural gas prices, both roughly 50% above the assumptions underpinning last month's MPC forecasts, are now expected to push inflation back up to 3.5%-4% by the end of the year. Some economists even see inflation hitting 5% if the conflict continues for the rest of the year and beyond.

Michael Saunders, a former MPC member, now at Oxford Economics, said the dilemma facing the MPC is acute.

Under normal circumstances, Central Banks overlook energy price shocks because interest rate adjustments take 12 to 18 months to affect the economy and are limited in their ability to address rising prices immediately.

But Saunders contends that this approach is no longer valid.

Recent experience has shown that inflation expectations are not as well anchored as had been hoped," he said, adding that energy price shocks could create persistent inflation "unless checked by monetary policy."

As both Putin and Trump have observed in Ukraine, there is no such thing as a “quick" war anymore.

The Prime Minister has responded to criticism of his decision to appoint Lord Peter Mandelson as the US ambassador, following the release of files related to his appointment yesterday. The Prime Minister apologised for the decision, adding that he takes responsibility for his "mistake".

Starmer was warned about a "general reputational risk" of sending Peter Mandelson to Washington. The files, published on the Government's website as a nearly 150-page document, detailed advice given to Sir Keir before Mandelson's appointment.

In his first public appearance since the publication of the documents, Sir Keir told reporters in Northern Ireland: "The release of the information shows what was known. That led to further questions.

“Unfortunately, due to the Metropolitan Police investigation, we cannot disclose that information yet. However, that does not diminish the fact that I was the one who made a mistake, and I am the one who offers the apology to the victims of Epstein, and I do that”, he remarked.

The pound traded without a clear direction as the ongoing spike in energy prices complicated the outlook for UK monetary policy.

Higher oil and gas prices create a challenging environment for Sterling. For energy-importing economies like the UK, rising costs act as an additional burden, squeezing household finances and raising concerns about slower economic growth.

At the same time, inflationary pressures from higher energy prices could lead the Bank of England to keep interest rates higher for longer than initially expected. Elevated borrowing costs may support the Pound by increasing its yield appeal.

Sterling fell to a low of 1.3338 and closed at 1.3342.

The Iran War, which has resulted in the death of the nation's Supreme Leader, has now impacted the sporting world, with the 2026 World Cup just 93 days away.

Donald Trump has warned Iran to stay clear of this summer's World Cup for 'their own life and safety' amidst the ongoing conflict in the Middle East. With less than 100 days until the tournament begins, scrutiny of the event continues to intensify.

Set to take place across the United States, Canada, and Mexico from 11 June, the tournament has seen Iran qualify as a competitor.

All their matches are scheduled to be held in American cities as they face New Zealand, Belgium, and Egypt in Los Angeles and Seattle. However, as tensions escalate in the Middle East. With the War nearing the two-week mark, the impact on the sporting world is becoming increasingly evident.

It would not be a “good look” for Trump if the tournament were marred by political demonstrations, regardless of their point of view, particularly since by the end of the event, campaigning for the mid-term elections will be in full swing.

The electorate is sure to remind the President of his pledge not to risk American lives on “pointless overseas wars with the objective of regime change.

Trump has confessed he 'does not care' if Iran participates, although it may affect America’s ability to host such events in the future.

Federal Reserve chairman nominee Kevin Warsh’s chances of getting quickly confirmed by the Senate looked downright gloomy yesterday as he met with more senators in a bid to bolster his chances.

“It doesn’t look like such a nice day today,” Warsh quipped to a reporter in the Hart Senate Office Building, as heavy rain poured outside, on his way to a chat with Senator Mike Rounds.

“Things are progressing well, good to see you,” Warsh said when asked how the meetings were going.

Rounds, posted on social media after the meeting, said that Warsh “will help keep the Central Bank accountable and focused on its statutory mission.”

Warsh’s nomination by President Trump is currently delayed due to an effective blockade imposed by Sen. Thom Tillis, a North Carolina Republican sitting on the Banking Committee. That committee is the initial hurdle for prospective Fed board members like Warsh.

As energy prices and inflation fears rise, expectations for Federal Reserve interest rate cuts are declining.

Traders in recent days have abandoned hopes of an early summer easing from the Central Bank,

Before the conflict, market expectations included a quarter-percentage-point rate cut in June, possibly another in September, and a small chance of three, depending on how the economy developed, according to the CME Group’s FedWatch calculations.

Much of the reasoning behind that approach was that a softening labour market, moderating inflation, and a new, less hawkish chair arriving in May would encourage the Fed to adopt an easing stance. However, as long as the Iran drama unfolds, the current expectation is that fighting inflation will remain the top priority.

“A higher inflation path will make it harder for the Fed to start cutting soon,” Goldman Sachs economists said in a Wednesday note.

The new Supreme Leader of Iran, Mojtaba Khamenei, said that attacks on neighbouring countries' military bases will inevitably continue, also adding that “Iran will not refrain from avenging the blood of its martyrs”.

Risks in the Strait of Hormuz are spiking after Iran reportedly targeted two Oil tankers, raising concerns about further disruptions to global energy supply.

Meanwhile, Initial Jobless Claims for the week ending March 7 fell to 213K, a little below the 215K forecast.

The US Dollar Index (DXY) reached a high of 99.76, a level it hasn’t reached since November 2025, as risk appetite was heightened by the threat of further attacks on shipping in the Gulf.

The Greenback gained support throughout the day and closed at 99.75.

Economists believe that rising Oil prices are quickly eroding Eurozone household purchasing power, especially through fuel costs. They stress that behaviour has largely normalised since the pandemic, limiting adjustment. At the same time, higher excise duties and mileage patterns mean that a growing share of disposable income will be absorbed by fuel costs, potentially weighing on private consumption and confidence.

"Ultimately, this implies that households will once again need to devote a larger share of their disposable income to fuel, with German households facing the largest increase. For them, the share of disposable income spent at the fuel pump is expected to rise to 3.5%, up from 2.8% last year.

Overall, the share of disposable income devoted to fuel ranged from around 2% in the Netherlands to 4.5% in Portugal last year."

As in all G7 countries and the wider global economy, the great unknown is the length of the conflict. The U.S. is still giving out mixed signals, with a “gung ho” President predicting a quick end, while his Defence Secretary continues to tell reporters that new targets are identified each day.

Iran is hoping that its attacks on its Gulf neighbours and the effective closure of the Straits of Hormuz will lead America and Israel back to the negotiating table.

While Trump may eventually support talks, Israel, as seen recently in Gaza, believes that once started, it needs to see the job through to the end, which means regime change in Iran and the destruction of Hezbollah in Lebanon.

The European Union has cautioned that the ongoing conflict might push Eurozone inflation above 3% this year.

EU economy chief Valdis Dombrovskis told finance ministers that Brent oil prices remaining around $100 per barrel, along with high gas prices, push inflation above 3% this year, Bloomberg reported.

If that happens, economic growth in 2026 would also be up to 0.4% lower than the 1.4% forecast made late last year, the EU’s economy chief added.

A notable rise in inflation could prompt the ECB to increase interest rates, and traders have heightened their bets on such a move later this year. The next policy decision is scheduled for 19 March, although no rate hike is anticipated at this stage.

Away from the conflict, the Spanish economy closed 2025, exceeding expectations, with growth outpacing that of many advanced economies, thanks to domestic demand. In the first few months of 2026, several indicators have shown slight moderation, partly due to adverse weather conditions in several autonomous communities.

Economic activity remains strong and retains considerable growth potential. However, the impact of rising energy prices will be felt across all sectors. Industry, which uses energy more intensively, will consequently be the most affected.

However, the adverse impact on tourism, including rising jet fuel prices, could be partially offset by Spain's reputation as a safe destination. Regarding prices, inflation is expected to ease to 2.4% during the year, although this may not occur, and levels might remain similar to those in 2025, keeping inflation around 3%.3%.

The Euro declined against the dollar for a third consecutive day yesterday, approaching its lowest level this year as rising energy prices raised concerns about Europe's import-reliant economy and prompted investors to seek the safety of the greenback.

The common currency fell to a low of 1.1510 and closed at 1.1512.

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