9 April 2026: Reeves faces fury over her £17.5bn North Sea block

The Prime Minister welcomed the announcement of a ceasefire in the war in Iran. However, the truce appears to be fragile at best, with Israel continuing to bomb Hezbollah in Lebanon and Iran still exerting significant control over the Strait of Hormuz.

Keir Starmer told journalists in Jeddah, Saudi Arabia, on the first leg of his visit to several Gulf States, that the UK will do “all it can” to ensure what has started as a “precarious peace” is extended into a more permanent peace deal.

Starmer has seen his “stock” rise amongst members of his own Party due to his denial of American requests to use UK bases to launch offensive attacks on Iran. Still, the damage done to what remains the country’s most important international partnership, the Special Relationship with the U.S., is yet to be seen.

The UK has, in the past, been pivotal in its relationship with the U.S., providing both physical and anecdotal support. Still, much will depend on how much change has been brought about in the “world order” by Trump’s unilateral action in Iran.

Domestically, it is hoped that the ceasefire can last beyond its initial two-week timeframe, since, according to the BBC, red warning lights are still flashing across the Middle East. The threat of a significant rise in inflation has gone away, at least temporarily. This will allow the Bank of England to reconsider loosening monetary policy, which had been deemed impossible while the war was raging.

Meanwhile, Rachel Reeves has faced accusations of hindering £17.5 billion worth of investment in North Sea oil and gas by delaying proposals to remove a controversial windfall tax. In light of the outbreak of war in Iran, the Chancellor reversed her plans to announce an early end to the Energy Profits Levy, which is currently set to expire in 2030.

A rise in energy prices caused by the Middle East crisis led Reeves to postpone those plans, frustrating the industry. Oil and gas companies have reportedly identified North Sea projects capable of producing over a billion barrels of oil and gas by the end of the decade. They informed the Chancellor last month that they were ready to proceed with these projects, but only if the government removed the windfall tax early.

One industry representative criticised the decision to delay the transition from the current Energy Profits Levy to an Oil and Gas Price Mechanism, calling it “economic illiteracy on steroids.”

This situation arises amid mounting pressure on Reeves and Energy Secretary Ed Miliband to reconsider their positions on the UK’s oil and gas reserves.

Miliband has banned new oil and gas exploration off Britain’s coast as part of his Net Zero plan; however, after the war in Iran, he faces pressure from Labour MPs and trade unions to permit more drilling.

Sources within the energy sector have indicated that without a tax overhaul, advancing a multi-billion-pound investment program would remain unviable.

One said: “Oil and gas companies have had their North Sea profits almost wiped out by a punitive energy profits levy that has rendered the UK virtually uninvestable.

That remains true given current oil and gas prices, and the Government is wrong to equate much larger global profits with meagre returns in the North Sea.

It would be economic illiteracy on steroids if the government did not seize a £17 billion investment opportunity by 2030.

Every £1 invested by the oil and gas sector generates around twice that amount in gross value added, so the government would effectively be turning down over £30 billion in additional value to the UK economy.

A Government spokesperson said: “We’re giving the sector and its investors the long-term certainty to plan, invest and support jobs with plans to replace the Energy Profits Levy when it ends by 2030, or earlier if its price floor is triggered.

We are also ensuring that the North Sea has a prosperous and sustainable future through record investment that helps deliver the next generation of skilled jobs while growing the clean energy industries of the future.”

The pound made significant progress following the announcement of the ceasefire. It rallied to a high of 1.3484 but fell back to close at 1.3398 as traders began to understand the fragility of the truce.

Stocks roared higher yesterday, after President Donald Trump announced a two-week ceasefire between the United States and Iran, bringing a pause to the war that started more than six weeks ago.

Official statements from Washington and Tehran, however, did not offer a clear picture of what the future of shipping traffic in the Strait of Hormuz would look like. Despite unanswered questions and conflicting comments throughout the afternoon, markets responded overwhelmingly positively to the news.

The S&P 500 closed up 2.5%. The Nasdaq Composite ended higher by 2.8%, and the Dow jumped 1,325 points.

It was the Dow's single largest one-day percentage gain since April 2025.

Strategists on JPMorgan Chase's trading desk said the S&P 500 could rise even further "as euphoria returns to markets."

Assuming this is a genuine attempt by both parties, the market is likely to treat this as a de facto end of the conflict, despite the economic damage still affecting all regions. That is a big ask, given the degree of mistrust that exists between the U.S. and Iran.

Other experts cautioned that investors and traders could be getting ahead of themselves. "We are not out of the woods yet. The ceasefire could fall apart. There will still be an initial inflation shock.

Not long after trading began yesterday, an Iranian news agency reported that traffic was suspended in the Strait of Hormuz in response to Israel’s attacks on Lebanon. The news did not slow down the drop in oil prices, however.

With both sides claiming victory, it is hard to see how the U.S. has advanced its cause by its six-week attack on Iranian military targets and some civilian infrastructure. Trump has flip-flopped about exactly what his goal has been. As he has failed to effect regime change or reopen the Strait of Hormuz by military force, his goals have continually shifted.

No doubt Fed officials will have welcomed the announcement, which, if made more concrete, will allow the Central Bank to reconsider its potential to cut rates more than once this year.

The conflict seems to have inflicted a new two-week hiatus on global markets, as it remains to be seen whether the peace talks expected to start tomorrow in Islamabad can move the process forward or have simply given both sides the chance to regroup.

No matter the damage that has been inflicted on Tehran and other towns and cities in Iran, the Strait of Hormuz remains Iran’s trump card (no pun intended) since it seems that the U.S. is unable to “bomb its way to its reopening”.

Likely, all financial markets will slowly ease into a period of “wait and see” until there is more evidence of any change in the current situation, one way or the other.

The dollar index fell to a low of 98.53 when the ceasefire was announced, but pared losses as risk appetite remained fragile. It closed at 99.04.

Eurozone retail sales fell in February, indicating that consumers were on uncertain ground ahead of the inflation increase caused by the conflict in the Middle East.

Volumes were down 0.2% on the month compared with flat growth in January, the European Union’s statistics agency said on Wednesday, a little weaker than the 0.1% decline expected by a consensus of economists polled by The Wall Street Journal. Industrial producer prices in the Eurozone increased by 0.2% for durable consumer goods and by 0.3% for both intermediate and capital goods, while decreasing by 0.2% for non-durable consumer goods and by 2.4% for energy. The largest monthly drops in industrial producer prices were recorded in Spain (-3.1%), Ireland (-2.6%), and Portugal (-1.8%). Conversely, the highest rises were observed in Croatia (3.8%), Finland (2.7%), and Lithuania (1.8%). Year-on-year, industrial producer prices fell by 3% in the euro area and by 2.7% across the EU in February.

This data was already largely out of date upon release, due to the turmoil caused by the conflict in Iran.

The race to succeed Christine Lagarde is advancing. By strategically leaking to the press that she might step down before her term officially ends in late October 2027, the President of the ECB has prompted potential successors to declare their intentions and eurozone countries to start lobbying.

The succession is further complicated by the impending departures of Philip Lane, Isabel Schnabel, and Luis de Guindos, all in 2027. Christine Lagarde has attempted to combine necessary diplomacy with technocracy during her tenure, often described as the “second most powerful woman in the world." Several unnamed members of her staff in Frankfurt have said that she has failed, as her diplomacy has largely faltered, and she lacks the skills of Draghi or Weidmann.

Two leading candidates are Klaas Knot, former Governor of the Dutch Central Bank, and Pablo Hernández de Cos, current General Manager of the Bank for International Settlements.

While little has been said publicly about Lagarde’s successor, particularly as events in Iran have overshadowed the race, there is little doubt that the “duck principal is in play. Plenty of action below, while all is peace and serenity above the surface.

The Euro is likely to be the biggest winner should the ceasefire hold, since the Eurozone had the most to lose from the war in Iran. Having the most hawkish Central Bank is both a blessing and a curse.

Yesterday, the single currency rallied to a high of 1.1721, but as risk “jitters” returned, it retreated to close at 1.1662.

Have a great day!