Burnham to meet Trump amid Iran war’s inflation spike

Andy Burnham is scheduled to hold a private meeting with President Donald Trump during the United Nations General Assembly in New York, amid the ongoing Iran war and its impact on global inflation. The Prime Minister is expected to request new measures from the US president to protect Ukraine and end conflicts in the Middle East.

Traders are wary of escalating tensions between Russia and Eastern European nations, as well as the persistent conflicts in the Middle East. Burnham will likely be accompanied by the AI minister, Kanishka Narayan, amid warnings from top tech leaders that artificial intelligence could pose an existential threat to humanity. Ukrainian missile attacks on refineries in Moscow have raised concerns about Russia's control over its diesel industry, following Trump's strikes on Iran in late February.

These strikes have heightened fears that British households and businesses could face price surges due to the disruption of trade flows across the Gulf region, which is crucial for more than a fifth of global oil and gas supplies.

Burnham's meeting with Trump could help alleviate uncertainty, according to XTB research director Kathleen Brooks. She noted that the drone attack in Moscow adds to the increasing geopolitical issues and rising energy prices. Iran's president Masoud Pezeshkian is also set to attend the UN summit, and there are reports that Trump might meet him.

Former Prime Minister Sir Keir Starmer opted not to join the US and Israel in offensive strikes on Iran but stated that diplomacy is the best approach to reducing energy costs. The Bank of England's Monetary Policy Committee has revised its inflation forecast upwards to "above" four per cent due to the ongoing war. A peak in inflation may occur early in 2027 if hostilities in the Gulf region persist and normal trade flows do not resume.

Governor Andrew Bailey warned that limited capacity exists for alternative export routes through the Strait of Hormuz, where shipping has been restricted. Minutes from the Bank's meeting last week indicate policymakers are prepared to raise interest rates to curb inflationary pressures in the UK economy.

Burnham faces a challenge just over five weeks before the UK Budget, as higher inflation and borrowing costs could limit government spending options and increase strains on households and businesses. Senior technical analyst Angeline Ong stated that the meeting represents an early test for Burnham to maintain the UK's close relationship with Trump, especially considering potential disagreements on issues such as Labour's North Sea oil policy and Ireland.

Ong added that foreign policy and domestic economy are increasingly intertwined, and any signs of renewed friction on trade or tariffs could negatively impact sterling and government bonds. A more conciliatory tone from Burnham could help remove at least one source of uncertainty for UK assets.