Rachel Reeves is set to meet her US counterpart after he argued “a small bit of economic pain” caused by the Iran war was worth it to prevent Tehran getting a nuclear weapon.
The comments by US treasury secretary Scott Bessent put him at odds with the chancellor, who has gone public with her anger and frustration at the “folly” of America’s actions in the Middle East and its financial fallout on families.
The pair were due to hold face-to-face talks in Washington DC on Wednesday during the spring meetings of the International Monetary Fund (IMF), which will be dominated by the ongoing crisis in the Gulf, which has inflicted a global economic shock and sent energy prices soaring.
Prior to the chancellor heading stateside, the influential financial body slashed Britain’s economic growth forecast as a result of the conflict and warned a worldwide recession could be a “close call” in a severe scenario.
The IMF said the international outlook had “abruptly darkened” as a result of the war, which threatens to throw the global economy “off course” and could cause an energy crisis on an unprecedented scale.
Of the major economies, the UK faces the biggest hit to growth, the IMF said, with forecasts slashed for the next two years. In a further blow to Sir Keir Starmer, the IMF also warned that inflation and unemployment will rise.
However, despite the “large” jolt to the global economy, Bank of England governor Andrew Bailey insisted the UK was much better placed to deal with it because of its resilient banking system, forged in the wake of the 2007-2009 financial crisis.
Meanwhile, President Donald Trump has said a second round of talks between the US and Iran could happen “over the next two days”, after negotiations at the weekend collapsed.
In an interview which is due to be broadcast on Wednesday, Mr Trump told the Fox Business Network he viewed the conflict as nearing completion and said Iran was keen to make a deal.
“If I pulled up stakes right now, it would take them 20 years to rebuild that country,” he said. “And we’re not finished. We’ll see what happens. I think they want to make a deal very badly.”
Tehran’s nuclear ambitions were a key sticking point.
Diplomats have been working behind the scenes as the US imposed its blockade of Iranian ports and Tehran threatened retaliatory strikes across the region, amid a shaky ceasefire.
At the same time, Sir Keir Starmer is seeking to coordinate international efforts to ensure the strategic Strait of Hormuz can remain open to shipping after hostilities end.
The critical waterway, used to move one fifth of the world’s oil and gas supplies, has become a major flashpoint in the conflict, with its effective closure by Iran hiking the cost of fuel, food and other basic goods.
However, responding to the spike in prices, Mr Bessent said “a small bit of economic pain for a few weeks is worth taking off the incalculable tail risk of either a nuclear Iran or a nuclear Iran that uses that weapon”.
He insisted “there is nothing more transient than what we are seeing now”, and added: “So the conflict will end, prices will come down, and then headline inflation will come down, and with that, gasoline prices will come down.”
Mr Bessent made his remarks after Ms Reeves told The Mirror: “I feel very frustrated and angry that the US went into this war without a clear exit plan, without a clear idea of what they were trying to achieve.”
She branded it a “folly” that impacted households in the UK and around the world.
The Resolution Foundation think tank has warned the average UK household could be £480 worse off over the current financial year as a result of the conflict, a figure Ms Reeves claimed she did not recognise.
The chancellor also took aim at Mr Trump’s blockade of the Strait of Hormuz, saying: “We’re not getting involved in the US blockade, we don’t think that is the right approach.
“All the way through this conflict, we have said de-escalate, de-escalate. The Conservatives and Reform – they both wanted to jump in feet first into this conflict and for us to play a part in active, aggressive, offensive action.”
The US president has defended the blockade aimed at putting pressure on Iran, arguing its control of the strait amounted to blackmail and extortion. He has warned that any hostile Iranian boats approaching American warships would be “immediately eliminated”.
US Central Command, which directs military operations in the Middle East, said no vessels have so far run the blockade.
Among those ships being barred are Chinese tankers. In response, the country’s president Xi Jinping said nations should “oppose the world’s retrogression to the law of the jungle”.
