The Guardian view on the Iran war: energy, markets and a dangerous illusion | Editorial

Whatever else Donald Trump’s “pause” is, it is not a ceasefire. Iranian barrages targeted Israel, Gulf Arab states and northern Iraq on Tuesday, while Israeli and US warplanes struck across Iran. What Mr Trump’s statement did was to narrow US targets to exclude power plants and energy infrastructure to calm jittery markets. But the fighting continues. With reports that the US is considering boots on the ground, Washington is waging war while searching for an exit – without a credible or unified negotiating position, as Israel’s Benjamin Netanyahu pursues his own agenda.
Mr Trump’s strategy, if he has one, might be to soothe markets now – and launch a massive escalatory strike over the weekend when trading desks are closed, in the hope of forcing the Iranian regime to fracture or capitulate. This rests on the idea that Tehran is brittle and will crack under American “shock and awe”. Sir Keir Starmer’s implicit judgment is that Iran will not cave. That disagreement may have been enough to send him to Mr Trump’s doghouse. Britain must stay out of US-Israeli adventurism. The war’s constraint is not capability – Washington has plenty of air power and Iran offers plenty of targets. But nothing can be resolved without a politically achievable objective.
The UK prime minister told MPs this week that it was “false comfort” to assume a quick end to the war. Sir Keir is on to something. This could be a prolonged conflict, with the strait of Hormuz unlikely to reopen soon and economic risks already crystallising. Business activity growth in Britain has slowed, manufacturers’ input costs saw their sharpest rise since 1992 and home loans are becoming dearer as the war feeds into energy and inflation fears. Ministers are drawing up contingency plans – such as lowering speed limits – to cut fuel use.
Given Sir Keir’s views, it seems odd that his chancellor talks as if any shock will be containable within her self-imposed constraints. Rachel Reeves has ruled out universal household support for any “Trumpflation” and insists help will remain within her “iron-clad” fiscal rules. That is a gamble when even the Bank of England governor, Andrew Bailey, is attending crisis meetings – a tell-tale sign that the state recognises the economic danger may be systemic. Perhaps Ms Reeves doesn’t want to frighten voters. Or maybe she thinks global strategic energy reserves will moderate price spikes. Markets are pricing expectations – above all, that Mr Trump will pull back quickly from confronting Iran. Clearly, some traders may be anticipating those moves better than others – or benefiting from information that is leaking.
But many will be in for a rude awakening if the physical constraints of oil and gas – flows disrupted, cargoes stranded and empty inventories – bite. Columbia University’s Jason Bordoff argues that the lesson of this crisis is not just to use less fossil fuel, but to rely less on global energy markets altogether. That implies not a temporary shock but a structural one – and the emergence of a more fragmented system of global energy use. Europe may go green; Asia might opt for coal. If so, the question for Ms Reeves is not whether her fiscal rules are credible to markets, but whether they survive contact with the reality now unfolding. Britain cannot achieve a clean energy transition on the cheap in a volatile world of disrupted supply and higher costs. Sir Keir has warned that the conflict may endure. The Treasury is behaving as if it will not.
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