Inflation stuck at 3 per cent last month even before the Middle East war kicked off, it was revealed today.

The headline CPI rate was in line with market expectations, although still well above the Bank of England’s 2 per cent target.

But hopes that price rises could be on a downward trajectory have been dashed by the chaos triggered by the US-Israeli attacks on Iran.

Ironically, much of the downward impetus on costs in February was due to falling pump prices – which have now hit three-year highs. 

Economists have been warning that if oil prices reach $150 a barrel a global recession is inevitable, with the West facing ‘1970s style Stagflation’.   

Rachel Reeves admitted that the Government was grappling with an ‘uncertain world’, but insisted she was taking a ‘responsible approach’.

The headline CPI rate was in line with market expectations, although still well above the Bank of England’s 2 per cent target

Rachel Reeves admitted the Government is facing an ‘uncertain world’ 

ONS Chief Economist Grant Fitzner said: ‘After last month’s slowdown, annual inflation was unchanged in February as various price movements offset each other.

‘The largest upwards driver was the price of clothing, which rose this month but fell a year ago. This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices.

‘A fall in the cost of alcoholic drinks due to promotional activity, compared with a rise last year, was also a downward driver, while little change in food prices, again compared with a small rise this time last year, added further downward pressure.’

Ms Reeves said: ‘In an uncertain world we have the right economic plan, taking a responsive and responsible approach to supporting working people in the national interest.

‘We’re taking £150 off energy bills and providing targeted support for those facing higher heating oil costs. 

‘We’re also acting to protect people from unfair price rises if they occur, bring down food prices at the till, and cut red tape to boost long-term energy security — building a stronger, more secure economy.’

The Bank of England said on Thursday recent increases in wholesale energy costs would delay the return of CPI inflation to target, as it was already seeing higher fuel prices.

It is now expecting inflation to be around 3 per cent in the second quarter of 2026, up from the 2.1 per cent that had been forecast in February.

The central bankers stressed the situation is volatile and events over the next six weeks could shed light on the scale of the disruption and impact to prices.

Economists have been giving stark warnings about the consequences if the situation does not ease soon.

Larry Fink, boss of US financial giant BlackRock, told the BBC that if Iran ‘remains a threat’ and oil prices stay high it will have ‘profound implications’ for the world economy.

A scenario where Tehran can rejoin the international community could bring energy costs back to the pre-war levels. 

But otherwise there could be ‘years of above $100, closer to $150 oil, which has profound implications in the economy’ and ‘a probably stark and steep recession’.

The head of Shell has raised alarm that governments could need to impose energy rationing within weeks. 

Speaking at an industry conference in Houston, Wael Sawan reportedly said some Asian countries had already brought in four-day working weeks and urged people to use less air conditioning.

‘It is a ripple efect,’ he said. ‘We see south Asia first to get that brunt, that moves to southeast Asia, north-east Asia and then more so into Europe as we get into April.

‘So we are trying to work with governments to alert them to the levers they may need to pull – including demand-side measures, what they need to do around storage, what they need to do around purchasing stock and so on and so forth.’

Pantheon Macroeconomics said if the latest spike in gas prices is sustained, then CPI could be headed to 4 per cent later this year.

Shadow chancellor Mel Stride said: ‘Thanks to Labour’s mismanagement, we are entering this latest energy crisis with the highest inflation in the G7. Under Rachel Reeves our economy is weaker and more vulnerable to external shocks.

‘Today’s figures show the cost of living was already rising too fast for families who will now be bracing for the impact of events in the Middle East on their bills.

‘The Chancellor’s irresponsible decision to ramp up borrowing and spending while hiking taxes on businesses has fuelled inflation. 

‘At the same time, Ed Miliband’s Net Zero dogma means we are reliant on imports instead of taking advantage of our own resources in the North Sea.’