Reeves: 'Nothing off the table' as Iran crisis lifts oil to $90 — markets react

Executive summary

Chancellor Rachel Reeves said "nothing is off the table" for energy support as the Iran conflict pushes oil and gas prices higher. Global markets are reacting to supply disruptions through the Strait of Hormuz, with Brent crude trading around $90 per barrel and strategic reserve releases under consideration. UK bond yields and mortgage rates have risen; targeted business support and coordinated reserve actions are being explored.

Key takeaways

• Chancellor: "Nothing is off the table at this stage. We are looking at targeted support as well as broader measures." (UK Treasury)
• Brent crude returned to roughly $90.05 a barrel after intra-day swings between about $83 and $94.
• The Strait of Hormuz carries just over 20 million barrels of oil per day and is effectively a global energy chokepoint.
• The IEA has proposed an extraordinary release of reserves that would exceed the 182 million barrels released in 2022.
• UK 10-year gilt yield: 4.64% (+9 basis points); UK 2-year gilt yield: 3.97% (+11 bps).
• Mortgage market: average two-year fixed homeowner rate at 5.01%, five-year fixed at 5.09%; ~472 mortgage deals withdrawn.

Government response and policy stance (UK)

The UK government is preparing contingency measures for energy-intensive firms and broader household protection. The chancellor stated: "We are looking at targeted support as well as broader measures but it is just too early to say what is needed." Plans developed during the 2022 energy shock are being reviewed and could be deployed more rapidly if required.

The UK also stands ready to release strategic oil reserves and to coordinate internationally to "put downward pressure on oil prices and make sure supply remains strong." The government notes that the UK has become less reliant on volatile international energy markets owing to increased deployment of renewable capacity bought through contracts for difference, and improved grid infrastructure under recent planning reforms.

Energy flows, chokepoints and market impact

The Strait of Hormuz is a critical artery for global energy supply. It carries just over 20 million barrels a day and is the busiest oil route after the Malacca corridor (roughly 23.2 million barrels per day). Unlike Malacca, Hormuz is far harder to bypass, making it the primary chokepoint for Gulf crude and seaborne LNG shipments (LNG).

Market impacts observed:

• Brent crude intra-day range: ~$83 to ~$94; recent print at $90.05 per barrel.
• Natural gas: UK gas up ~1.8% (122.82 p/therm); European gas up ~2.8% (48.72 EUR/MWh).
• Spot gold rose modestly to the high-$5,900s per ounce as investors sought safe havens.

Energy producers and industry leaders have warned of substantial disruption to output and logistics if the strait remains impassable, with storage filling quickly across the region and shipping routes curtailed.

Bond markets and policy expectations

Rising energy-driven inflation risk has shifted rate expectations across developed markets. Key moves:

• UK 10-year gilt yield: 4.64% (+9 bps).
• UK 2-year gilt yield: 3.97% (+11 bps).
• Germany 2-year Bund yield: 2.34% (+7 bps).

Markets have priced a rising probability of further rate increases in the euro area and elsewhere; investors now see a material chance of higher terminal rates and a reduced likelihood of imminent rate cuts. This repricing has pressured credit-sensitive sectors and raised borrowing costs across fixed-income markets.

Mortgage market: rates and product availability

Mortgage pricing has reacted quickly: the average two-year fixed homeowner mortgage rate is 5.01% (previous 4.84%), and the average five-year fixed is 5.09% (previous 4.96%). Approximately 472 mortgage products were withdrawn in recent days as lenders reset pricing to reflect higher swap and gilt rates. Market participants expect many withdrawn products to return once lenders recalibrate spreads.

International coordination: strategic reserves and G7 posture

G7 energy ministers and the International Energy Agency (IEA) are discussing proactive measures, including the coordinated release of strategic oil reserves. Member states indicate in principle support for reserve use to stabilise markets; operational details (volume, timing, allocation) require further negotiation, and outreach could extend to major non-IEA consumers.

An extraordinary release, if enacted, would be designed to exceed the 182 million barrels deployed in 2022 and be coordinated across multiple jurisdictions to ensure market impact.

Market implications for traders and institutional investors

• Commodities: Elevated volatility in Brent and regional gas warrants active risk management; consider options or transferrable hedges for short-term protection.
• Rates: Higher gilt and Bund yields suggest upward repricing of duration; review interest-rate sensitive allocations and hedging strategies.
• Equities: Energy and commodity-related sectors may outperform in the near term, while consumer-facing sectors face margin pressure from higher fuel and freight costs.
• Liquidity: Expect episodic liquidity squeezes in shipping and energy storage markets; monitor freight and insurance premiums.

What to watch next (timeline)

• IEA governing discussions and any formal extraordinary reserve release decision.
• Treasury Committee updates and announcements on targeted UK support measures (UK, GMT).
• US inflation prints and central bank meeting calendar, which will influence global rate expectations (US).
• Developments in the Strait of Hormuz and shipping security operations that could restore safe passage.

Bottom line

Supply disruptions through the Strait of Hormuz have pushed Brent back toward $90 per barrel and revived concern about inflation and higher interest rates. The UK is preparing targeted support options and stands ready to coordinate strategic reserve releases internationally. For institutional investors and traders, the immediate environment calls for heightened focus on commodities risk, duration exposure, and liquidity in energy-related markets.