Lammy Declares UK Strikes on Iran Lawful as Oil Hits $85 and Hormuz Premiums Surge 400%
Deputy Prime Minister invokes Article 51 self-defence doctrine while Brent climbs to 15-month high and war risk insurance for tankers quintuples in 48 hours.
David Lammy confirmed today that RAF strikes on Iranian missile sites would be lawful under international law, marking Britain’s sharpest escalation in Middle East posture since the US-Israeli assault on Iran began six days ago. Speaking to BBC Breakfast, the Deputy Prime Minister and Justice Secretary said The Irish News reported: “It is entirely legal to protect our people and protect our staff, and therefore all operational capability is available to us in those circumstances.”
The UK was not involved in the initial February 28 US-Israeli strikes that killed Supreme Leader Ali Khamenei. Prime Minister Keir Starmer granted Washington access to British bases on March 1 — only after Iran launched retaliatory missile barrages across Gulf states, according to UK Government statements. London has invoked Article 51 of the UN Charter, claiming collective self-defence of regional partners hit by Iranian drones.
Market Dislocation Accelerates
Brent crude settled at $85.41 per barrel Thursday, up 21% this week and the highest since January 2025, CNBC reported. West Texas Intermediate surged 8.5% in a single session to $81.01 — the largest daily gain since May 2020. CNBC data showed Brent jumped 9% on March 1 alone after Iran’s Revolutionary Guard declared the Strait of Hormuz closed.
Shipping through the waterway — which carries 20% of global oil — has collapsed. Windward Maritime AI tracking showed traffic fell 80% within 24 hours of strikes beginning. War risk insurance premiums climbed from 0.2% of hull value to 1% in 48 hours, according to Al Jazeera. For a $100 million tanker, that translates to a jump from $200,000 to $1 million per voyage. At least seven vessels have been struck; two crew members killed.
Goldman Sachs raised its Q2 Brent forecast to $76 per barrel but warned that five additional weeks of Hormuz disruption could push prices to $100, deVere Group analysis noted. JP Morgan’s Natasha Kaneva told CNBC that Gulf storage could be exhausted in three weeks, forcing production halts and sending oil to $120.
FTSE Energy Majors Rally as Sterling Slides
Shell shares rose 3.7% and BP climbed 2.7% on Monday as oil prices spiked, Yahoo Finance reported. The FTSE 100 fell 153 points to 10,413 by Thursday’s close, down 1.4% for the week, but Energy and defence names cushioned losses. BAE Systems surged 6.9% on the conflict’s first trading day.
The pound weakened to $1.3310 against the dollar — a three-month low — as safe-haven flows favoured the greenback, according to FXStreet. Sterling is a structural loser in energy crises: the UK is a net importer, and rising oil costs stoke inflation that constrains Bank of England rate cuts. Pound Sterling Live analysts noted GBP typically underperforms against Swiss franc, yen, and dollar during Middle East escalations.
| Company | Sector | Week Change |
|---|---|---|
| BAE Systems | Defence | +6.9% |
| Shell | Energy | +3.7% |
| BP | Energy | +2.7% |
| IAG (British Airways) | Travel | -7.0% |
| Standard Chartered | Banking | -5.2% |
Legal Doctrine and Parliamentary Tensions
Lammy’s assertion of legality rests on Article 51 of the UN Charter, which permits collective self-defence when a member state faces armed attack. The UK government published a legal summary on March 1 stating its actions are “solely focussed on ending the threat of air and missile attacks against regional allies unlawfully attacked by Iran.”
But the doctrine is contested. EJIL: Talk! legal scholars noted the UK must ensure bases are not used for broader US-Israeli offensive operations, or London risks complicity in what most international lawyers deem unlawful aggression. Iran’s strikes on Gulf states — which did not host launch sites for the initial US-Israeli assault — are themselves legally questionable, creating what one analyst called “a situation where Iran is simultaneously both victim and perpetrator.”
The Spectator reported Cabinet splits over the decision. Chancellor Rachel Reeves, Home Secretary Yvette Cooper, Energy Secretary Ed Miliband, and Lord Chancellor Shabana Mahmood opposed granting base access at a National Security Council meeting last Friday. Permission was granted Sunday only after Iranian missiles hit Bahrain, Qatar, and Cyprus.
“It is entirely legal to protect our people and protect our staff, and therefore all operational capability is available to us in those circumstances.”
— David Lammy, UK Deputy Prime Minister
Inflation and Rate Path Under Threat
US retail gasoline prices jumped 27 cents in a week to $3.25 per gallon — the fastest rise since Russia’s invasion of Ukraine, CNBC reported, citing AAA data. Diesel futures hit $3.54 per gallon, the highest since January 2023. Minneapolis Fed President Neel Kashkari said it was “too soon to know” if the conflict would derail inflation targets, but acknowledged “monetary policy impact” is likely.
European natural gas surged 42% as Qatar halted LNG production at key terminals, Proactive Investors noted. UK gas prices leapt 50% to over 120p per therm. Bank of America warned Brent could exceed $100 and European gas could break €60/MWh if disruption persists, threatening central bank easing cycles across both continents.
What to Watch
- Hormuz reopening: Every week of closure drains Gulf storage and compounds supply shortfall. US naval escorts announced Tuesday have yet to restart commercial traffic.
- Iranian succession: Reports indicate Mojtaba Khamenei and Ali Larijani positioning for power. Hardline consolidation extends conflict timeline; moderate leadership opens negotiation window.
- UK base usage transparency: Parliament demanding clarity on what US operations London has authorised. Scope creep risks dragging Britain into offensive campaign it publicly disavows.
- OPEC+ response: Cartel added 206,000 bpd on March 2 but analysts doubt it offsets 15 million bpd Hormuz flow. Watch for emergency output increase.
- Fertiliser cascade: Urea prices up $60–80/ton this week as one-third of global exports transit Hormuz. Spring planting season amplifies agricultural commodity risk.
Markets are pricing a binary outcome: either rapid de-escalation that unwinds the oil spike within weeks, or protracted disruption that pushes Brent past $100 and forces demand destruction. The UK’s legal posture — defensive in rhetoric, offensive in capability — will be tested if Washington expands targeting beyond missile sites. For now, Lammy has drawn the line. Whether it holds depends on how long Iran keeps Hormuz dark.