Britain is to “step up” defensive support for Gulf states after Iran attacked energy sites across the region in a “serious escalation” of the war that could push up inflation and interest rates.

The price of Brent crude climbed as high as $119 a barrel and European gas prices briefly surged by 35 per cent after Iran pounded Qatar’s Ras Laffan energy hub and other Middle Eastern oil and gas infrastructure with missiles.

Interest rates were held at 3.75 per cent instead of the previously expected cut, as the Bank of England warned that the war could push inflation as high as 3.5 per cent by July on the back of rising energy bills, and that rates could rise – creating misery for homeowners.

It came as:

Iran’s attacks were in retaliation to an Israeli strike on the vital South Pars gas field, which drew condemnation from the Gulf states as well as Tehran. It was the first attack of the war so far on an energy production facility. Tehran fired missiles at multiple energy sites across the Gulf, including a Saudi oil refinery, Qatari gas facilities and two more oil refineries in Kuwait.

While Sir Keir Starmer and Emmanuel Macron called for de-escalation, President Trump threatened to “massively blow up” the South Pars facility if Iran did not halt its retaliatory attacks, repeating his claim that US forces had “obliterated” Iran’s navy and military, adding that the war was “substantially ahead of schedule”. He denied that plans were being made to send more American troops to the region.

John Healey, the UK defence secretary, said Tehran’s tit-for-tat responses threatened to further destabilise the region and Europe’s economies. He called them a “serious escalation”, adding: “They further destabilise the region and we will step up the defensive support that we can offer to those Gulf states.”

British forces are already deployed to the Middle East, with RAF jets flying defensive sorties against Iranian drones across the Gulf and British air defence systems protecting critical infrastructure in Saudi Arabia. UK military planners have also joined US Central Command to help formulate proposals for opening the Strait of Hormuz, a critical trade route for the world’s oil and gas.But there were signs of growing frustration towards Washington’s war aims in the Gulf states, with Oman’s foreign minister claiming that the conflict was President Trump’s “greatest miscalculation”.

In the most scathing attack on Washington’s foreign policy yet by a Gulf state, Badr Albusaidi said “this is not America’s war” and criticised Mr Trump for supporting Israel. Writing in The Economist, he called on American allies to help extricate it from the conflict, which has continued for a third week despite failing to achieve the US and Israel’s stated aim of instigating regime change in Tehran or stopping its nuclear programme.

Meanwhile, the Bank of England has warned that it may have to put up interest rates if the war continues to drive up inflation and unemployment. Its governor, Andrew Bailey, said the impact was already being felt by consumers as petrol prices surge and that he is “ready to act as necessary to ensure inflation remains on track to meet the 2 per cent target”. That would pave the way for a rate hike as early as the end of April.

Bets on the financial markets suggest a 50/50 chance that Britain will face higher interest rates from next month – and the possibility of two more rises by the end of the year.

Danni Hewson, head of financial analysis at AJ Bell, said: “Markets are now pricing in an almost 50 per cent chance that April’s meeting will see rates rise to 4 per cent with the potential for two additional rate hikes by the end of the year. But no one has a crystal ball. No one knows how long the conflict will last or the amount of damage that could be inflicted on crucial energy infrastructure by the time it ends.”

Stock market today: Benchmark indices Nifty50 and BSE Sensex opened in green on Friday after a big selloff on Thursday that saw markets tank over 3%. While Nifty50 opened above 23,200, BSE Sensex rose over 700 points, just shy of 75,000. At 9:16 AM, Nifty50 was trading at 23,229.15, up 227 points or 0.99%. BSE Sensex was at 74,945.45, up 738 points or 0.99%.Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited says, “Market has been oscillating between some hope and fear during the last four days. The gains which Nifty accumulated in the previous three days have been completely wiped out with the 775 point loss yesterday. This oscillation between hope and fear is likely to continue in the near-term.Today there is potential for the market to move up since hope of de-escalation is back. Israel PM’s remarks yesterday indicate that there won’t be further attacks on Iran’s oil and gas infrastructure. This has cooled the Brent crude to $ 106 from the peak of $118 yesterday. The HDFC issue impacted Nifty Bank significantly yesterday and it also contributed to the crash in Nifty. This is likely to be a storm in a tea cup. Even though the uncertainty continues, the market construct is ripe for a bounce back today. Beaten down financials and autos are set for a bounce back.”Indian equity markets tumbled sharply on Thursday, breaking a three-day gaining streak, as escalating tensions in West Asia sparked a global risk-off sentiment. Analysts said the market is entering a phase of heightened vulnerability, with investor confidence increasingly influenced by fast-moving geopolitical developments and a surge in crude oil prices.Asian markets opened higher on Friday after US equities recovered from their intraday lows and oil prices eased. However, Wall Street had closed lower on Thursday, dragged down by declines in Micron Technology and Tesla, as rising oil prices stoked inflation worries and dampened expectations of future interest rate cuts.Gold prices edged up on Friday but were still set for a third straight weekly decline, pressured by a strong dollar and the US Federal Reserve’s hawkish stance, which has reduced hopes of near-term monetary easing. Oil prices, meanwhile, fell on Friday after major European countries and Japan signalled their willingness to support measures to ensure safe passage for vessels through the Strait of Hormuz, while the US outlined steps to boost supply.Foreign portfolio investors remained net sellers, offloading equities worth Rs 7,558 crore on Thursday, while domestic institutional investors provided some support, purchasing shares worth Rs 3,864 crore.(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India)