Faisal Islam: The two big decisions the chancellor must make

Image source, AFP via Getty ImagesByFaisal IslamEconomics editorPublished27 September 2026, 00:00 BST"It is tough," John Healey admitted to me earlier this month when I asked him if there had been too much doom-mongering?

"Conflicts, uncertainty, driving up inflation, driving up interest rates. But we've got great strengths. We've got good reasons to be confident about the future of Britain," he insisted.

The new scheme to try and help young people get on the property ladder, announced on Saturday, was aimed at boosting confidence in the economy.

But the chancellor is now facing two big decisions before his inaugural Budget on 28 October.

Firstly, about the longevity of the economic pressures caused by the Iran War, and then about how to sustain a modest but notable uptick in economic spirits, through yet more global turbulence.

In his first weeks as chancellor the oil price fell as low as $75 a barrel while the yield - the effective interest rate - on 10-year government bonds was 4.9%.

Just over two months later oil has largely traded above $100 and the 10-year yield is at around 5.4%. It is the ultimate double whammy for a chancellor facing his first Budget.

Yet there is something unusual about this energy shock. It could quickly reverse, as illustrated earlier in the summer when assumptions about a deescalation in the US Iran conflict led to sharp falls in energy prices and yields.

In New York this week both President Trump and his Iranian counterpart President Pezeshkian suggested November's US midterm elections were connected to when the war might end.

The Iranians would wait until after the elections to seek peace because the war's impact on the cost of living - particularly soaring diesel costs - could damage him electorally, the US president told the UN General Assembly.

The 3 November vote is six days after the Budget. No one could rely on there being a settlement by then, but it is plausible.

So the Budget tax, spend and borrowing forecasts could be based on a prolonged conflict, which is actually on the cusp of ending, or even already ended.