The economic fallout from the US-Israeli campaign against Iran continues to dominate the trade headlines.
Oil prices fell following US President Donald Trump’s suggestion that the campaign against Iran could end soon, while European leaders held off on dipping into strategic oil reserves.
Iran energy crisis
Trump told reporters yesterday (9 March) that military action in Iran could end “very soon”, adding that the campaign was “very complete, pretty much”.
However, in a Truth Social post shared earlier today (10 March), he also threatened greater destruction “if Iran does anything that stops the flow of Oil within the Strait of Hormuz”.
“They will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far. Additionally, we will take out easily destroyable targets that will make it virtually impossible for Iran to ever be built back.”
Nonetheless, markets were placated, with the price of oil dropping from a four-year high of US$119 per barrel yesterday to below $90 today.
The fall follows a meeting held yesterday in which G7 finance ministers failed to reach an agreement on releasing strategic oil reserves amid the growing shortfall.
At that meeting, head of the International Energy Agency (IEA), Fatih Birol, warned that “in addition to the challenges of transit through the Strait of Hormuz, a substantial amount of oil production has been curtailed”.
“This is creating significant and growing risks for the market.”
The IEA’s 32 members hold strategic reserves designed to ward off oil price shocks in the event of an energy crisis. The consensus was that, while ministers were open to releasing reserves, this wasn’t necessary yet. The mood was summed up by French finance minister Roland Lescure, who said “we are not there yet”.
The last time IEA members resorted to crude stockpiles was during 2022, in response to Russia’s invasion of Ukraine and the following energy price shock. Politico reports that that the 2022 crisis is lingering in the minds of many European leaders, with European Economy Commissioner Valdis Dombrovskis telling reporters that “a more protracted” energy crisis could have a “substantial stagflationary shock on the global and European economy”.
Speaking to the publication, Ajay Parmar, the director of market intelligence firm ICIS, warned that stalled production across a number of Middle East nations could mean “the consequences for the market will be far more significant than that seen in 2022”.
UK fuel duty reversal
UK chancellor Rachel Reeves, who said she “stand[s] ready to support a co-ordinated release” of oil reserves, may also be preparing to take a step to mitigate the energy shock closer to home.
inews reports that Reeves may reverse the planned fuel duty increase slated for September in response to the inflationary impact of the energy crisis on petrol. The RAC has warned that petrol prices could rise to 140p per litre, up from 132p before the crisis.
Speaking to MPs, Reeves said that the situation in Iran could cause “upward pressure on inflation in the coming months”. The crisis is already anticipated to impact UK monetary policy, with the interest rate expected to be held at 3.75% having been on a steadily downward trajectory. Many investors are even predicting rate hikes, CityAM reports.
In November’s Autumn Budget Reeves announced that the 5p cut to the duty – in place since April 2010 – would only be extended until September 2026.
China trade surplus
China began the year by substantially increasing its trade surplus, which rose 21.8% in dollar terms in the first two months of the year. The FT reports that China vastly surpassed predictions made by economists that it would extend its trade surplus by 7.1% over this period.
China’s export dominance in global trade is causing increasing friction with trade partners, prompting a slew of new EU policy changes to protect domestic industry and attracting some of the harshest tariff rates imposed by Trump last year.
The FT report also notes that rising exports to South-East Asia drove the early 2026 surge, something many experts have interpreted as Chinese firms transshipping goods through the region and on to the US to avoid new customs duties.
The new figures are released ahead of a meeting scheduled later this month between Trump and Chinese premier Xi Jinping. While the rising Chinese trade surplus could prompt further ire from Trump, the Supreme Court’s ruling last month that his initial ‘reciprocal’ tariff regime – designed to address imbalances with trading partners – was illegal, has weakened the US leader’s hand.
Elsewhere in the headlines
- In a move set to further irk Trump and US tech giants, the UK could introduce new powers enabling government to bypass parliament when regulating online platforms
- Canadian prime minister Mark Carney may be heading to the UK, with plans to persuade Starmer to add the UK to his Defence, Security and Resilience Bank, created to boost members’ spending capacity for arms procurement
Yesterday in trade
- The UK government highlighted its upcoming trade deal with India, encouraging traders to register with HMRC in order to take advantage of preferential trading terms
- There was also a missive from the Department for the Environment, Farming and Rural Affairs on preparing for the imminent sanitary and phytosanitary agreement with the EU
