Rachel Reeves delivers her Spring Statement, as the FTSE 100 tumbles and gas prices soar

The Chancellor claimed her growth plan was working and hailed falling inflation and lower interest rates in her Spring Statement today, delivered against a backdrop of the stock market tumbling and gas prices soaring.

Rachel Reeves said she had ‘the right economic plan for Britain’, although the Office of Budget Responsibility downgraded growth expectations for this year, while raising them for 2027 and 2028.

She highlighted government borrowing that was £18billion lower than forecast in autumn and said households would be £1,000 better off by the end of the parliament. 

However, the OBR forecasts the statement was based on will almost certainly end up incorrect as conflict with Iran in the Middle East erupted after they were made.

Neil Wilson, at Saxo Markets, said: ‘These forecasts are probably not worth much if the conflict in the Middle East results in a sustained increase in inflation and hit growth.’

The FTSE 100 sank further into the red on Tuesday – taking losses so far this week to over £100billion – as the conflict across the Middle East escalates .

Oil and gas prices have rocketed amid fears about disrupted supply and a fresh bout of inflation, as central banks had finally appeared to have prices under control. 

Gas prices have rocketed 98 per cent in two days and although they remain well below the levels of the 2022 energy crisis, analysts fear a sharp rise in bills, with Stifel forecasting the energy price cap may hit £2,500 in summer.

Iran has reportedly blocked the Strait of Hormuz – a crucial shipping route for crude tankers – pushing brent crude above $80 a barrel again. 

It prompted a renewed global equity selloff across Asia and Europe this morning as Israel launched fresh attacks on Tehran and Beirut.

After closing 1.2 per cent or 130 points lower at 10,780 on Monday, the FTSE 100 fell as much as 335 points on Tuesday morning to a low of 10,445.

After recovering some ground, the FTSE 100 was trading down 2.7 per cent, or 288 points, at 10,492.

The slump means £111billion has been wiped off the value of the blue-chip index in just two sessions. 

Almost all stocks were in the red, despite the index’s substantial weighting to energy, commodities and defence stocks. 

Meanwhile, miners Fresnillo, Anglo American and Antofagasta were down between 3 and 4 per cent.

It came as gold slipped 0.5 per cent to $5,300 per ounce but remains up nearly 3 per cent over the course of the week. Silver also lost its gains, trading down 4.6 per cent to $85.

Brent crude is up 4 per cent to nearly $81 a barrel, while European gas prices are up by more than 20 per cent, after Qatar shut down liquified natural gas (LNG) production on Monday after Iran targeted it with drone strikes.

Gas prices remain below levels seen during the 2022 energy crisis, but are higher than their level in January, when they rose due to colder weather.

A prolonged spike in prices could trigger a fresh bout of energy inflation, which could dent hopes of an interest rate cut. Investors have already trimmed bets on a rate cut this month, from 80 per cent to 50 per cent.

It comes as borrowing costs climbed higher amid the conflict and ahead of the Spring Statement, with the ten-year gilt yield nearing 4.5 per cent.

‘The FTSE 100 has taken a further opportunity to let some air out of the tyres after a stirring run this year, despite the resilience within the oil and defence sectors in particular and is having some difficulty at present in establishing a floor,’ said Richard Hunter, head of markets at Interactive Investor.

‘The themes were similar to the previous session, with a broad and sharp markdown offsetting any resistance offered by those sectors and leading to another notable dip at the open.’

In Asia, the Nikkei and Shenzhen indices both closed down over 3 per cent, while Germany’s Dax opened 2 per cent lower, while France’s CAC fell 1.6 per cent.