Britain willing to release emergency oil reserves, says Rachel Reeves

She said the move may be necessary “to put downward pressure on oil prices and ensure that supply remains strong.”

She added: “We’re working closely with both our allies in the Gulf and in the G7 and also with the insurance industry to ensure that as quickly as possible we can get those movements going again.”

G7 finance ministers met on Monday to discuss the use of reserves, while G7 energy ministers on Wednesday said they would support “in principle” the release of stockpiles.

Around a fifth of global oil and gas exports pass through the narrow Strait of Hormuz, but Iran has threatened to attack vessels using the trade route linking the Persian Gulf with the Gulf of Oman.

Three cargo ships were hit today while apparently trying to slip through the narrow strait.

Ms Reeves told the Treasury Committee that it is "certainly not good for the British economy to have trade disrupted" as a result of the Middle East crisis.

She added that it is “too soon” to predict what the impact of the war would be on inflation, growth and interest rates.

The Office for Budget Responsibility told the same committee on Tuesday that the Iran war could push up inflation to 3pc by the end of the year, around 1pc higher than a 2pc forecast issued last week.

Drivers were discouraged from taking "non-essential" car journeys earlier this week amid fears of a rush to the pumps.

The price of crude oil surged past $100 a barrel on Monday - an impact of the ongoing war in the MIddle East and restrictions on exports through the Strait of Hormuz.

The restricted flow of oil from the Middle East could see prices "jump to between 150p and 170p per litre" over the coming weeks.

It's the first time prices have seen such a surge since 2022 following the outbreak of war in Ukraine.

Sir Keir Starmer said he is in discussions with international partners to protect British businesses from the effects of the Iran War.

Read more: Iran war LIVE: Oil price passes $100 a barrel as Secretary of War Hegseth says Iran will ‘surrender’

Read more: 'You're right to worry about your bills and jobs,' Starmer tells UK

AA president Edmund King, who issued the advice earlier this week, also suggested motorists should change their driving style to be more fuel efficient.

Mr King said: “The longer this conflict goes on, the more effect it will have on the cost of oil.

“Any time Brent Crude passes 100 dollars per barrel raises concern across the markets, for the haulage industry and drivers.

“There will be gradual increases in pump prices, but this shouldn’t happen overnight as fuel has been purchased at previous prices.

“Our suggestion is that drivers should not change their refuelling habits but can consider cutting out some non-essential journeys and changing their driving style to conserve fuel.”

The comments come as the PM told the public they are 'right to worry' about 'bills and jobs,' following the outbreak fo war.

“The job of government ‌is obviously to get ahead, look around the corner, to work with others,” the Prime Minister said.

The government is “talking to our international partners, as well, about what more we can do together to reduce the likely impact ⁠on people here,” he added.

Since the war began on February 28, the average price of a litre of petrol at UK forecourts has increased by 5p to 137.5p, while diesel is up 9p to 151.0p.

Analysis of the historic link between oil and fuel prices by think tank the Energy and Climate Intelligence Unit shows oil trading at 100 dollars a barrel typically results in petrol prices of about 150p per litre, while oil hitting 120 dollars a barrel means petrol prices of about 170p per litre.

RAC head of policy Simon Williams said: “Average petrol and diesel prices have rocketed in the last week and are unfortunately likely to keep on rising, so the situation for UK drivers is looking increasingly bleak.

“Unleaded is almost certainly going to reach an average of 140p in the next week or so, while diesel looks highly likely to climb to at least 160p a litre.

“We encourage drivers to continue filling up as normal but to shop around for the best prices.”