Prime Minister Sir Keir Starmer is set to chair an emergency COBRA meeting today amid warnings the oil price could soon hit $150 a barrel.
Disruption to the Strait of Hormuz has driven sharp increases in energy and fertiliser costs, raising concerns over inflation, food prices and the risk of a wider economic slowdown.
Bruce Kasman, global head of economics at JP Morgan, said: “A scenario in which the strait remains closed for an additional month would be consistent with oil prices rising towards $150 a barrel and constraints on industrial consumers of energy supply.”
Rising energy costs are also feeding directly into UK agriculture, where farmers are facing steep increases in fertiliser prices at a critical point in the growing season.
Urea prices have more than doubled since the start of the year, increasing pressure on producers and pointing to higher food prices in the months ahead.
John Fuller, chairman of Nitrasol, told Sky News: “In the last six weeks it's gone up probably by about 25% as we've had to fight off other buyers.
“We had a shipment last Sunday, and those farmers that bought early are securing the old price, but for those who left it to the last minute, I'm afraid that we're having to buy from the new cargoes, those are more expensive.
“It's a really serious situation. In some respects, it's worse than it was four years ago in the Ukrainian situation, and we all know what happened six months later.
“There was 10% inflation, and that knocked the government right back. And I just hope that the government grips this.”
Farmers are now facing a choice between absorbing higher costs or reducing fertiliser use, which would lower yields and tighten supply.
The pressure is already visible at the pump, with diesel prices reaching 181.2p per litre, up 27% since the conflict began, while petrol has risen 14% to 152.0p.
Against this backdrop, the prime minister is bringing together senior ministers and industry leaders to coordinate a response.
He said the Government would act to “make sure that everything that we need to have in place, everything is monitored and audited properly”.
Speaking to business leaders yesterday, he said: “The Government can’t do it on its own. You can’t do it on your own.
“We’re going to have to work together on this.”