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THE British government is preparing for potential economic turbulence as Prime Minister Keir Starmer convenes an emergency COBRA meeting to assess the fallout from the escalating conflict involving Iran.
Reuters reported on Monsay that the meeting, scheduled for Monday, will bring together senior figures including Chancellor Rachel Reeves and Bank of England Governor Andrew Bailey, alongside key cabinet ministers, as policymakers confront the risk of a renewed economic shock driven by energy market instability.
“Topics expected to be covered are the economic impact of the crisis on families and businesses, energy security and the resilience of industry and supply chains alongside the international response,” the finance ministry said ahead of the meeting.
Investor anxiety has intensified following warnings from Tehran that it could target critical infrastructure in Gulf states if Donald Trump proceeds with threats against Iran’s electricity grid, raising fears of wider disruption to global energy supplies.
The United Kingdom is viewed as particularly exposed due to its reliance on imported natural gas, persistent inflationary pressures and already strained public finances.
Government bonds have come under sharper pressure than those of many peer economies, reflecting growing concerns over fiscal resilience.
Chancellor Reeves has cautioned that it is too early to determine the full economic impact of the conflict, resisting broad cost-of-living interventions while signalling that more targeted support may be introduced if necessary.
The prospect of a sustained surge in oil and gas prices has heightened fears that inflation could climb back towards 5 per cent later this year, dealing a further blow to Britain’s fragile growth outlook and complicating efforts to stabilise public finances.
A prolonged energy shock could force the government to expand support measures, potentially requiring further tax increases and undermining its fiscal repair strategy.
Market tensions have already become evident. Yields on 10-year UK government bonds surged above 5 per cent last week for the first time since the global financial crisis, reflecting a sharp reassessment of interest rate expectations and fiscal risks.
Where markets had previously anticipated rate cuts, expectations have shifted rapidly towards the possibility of tighter monetary policy.
The Bank of England has indicated it stands ready to act to keep inflation aligned with its 2 per cent target, though policymakers remain divided on the timing of any rate increases.
The sell-off has spread beyond short-term debt to longer-dated bonds, signalling that investors are increasingly pricing in the broader fiscal impact of higher energy costs.
“Developments over the weekend mean we are entering a new and very dangerous phase for financial markets,” said Neil Wilson, strategist at Saxo Markets.
“The move in bond yields last week was material and has added already to stress in financial markets. Markets are pricing for a central bank response.” - March 23, 2026
