UK households will suffer £2,400 hit from Iran war, analysis shows

UK households will suffer £2,400 hit from Iran war, analysis shows The conflict is continuing to ‘squeeze’ the British economy, thinktanks warn - Bookmark - CommentsGo to comments The US-Iran war is set to deal a severe financial blow to UK families, cutting into average household spending power by £2,400 over the next two years. According to new analysis by the Centre for Economics and Business Research (CEBR), a combination of surging inflation and sluggish wage growth is estimated to knock £1,100 off average real household incomes in 2026, followed by an additional £1,300 loss in 2027. In total, the think tank calculates that the Middle East conflict will wipe a staggering £70.4 billion off the UK’s real disposable income. Economic analysts attribute the shock to shipping disruptions along the Strait of Hormuz, which are hitting British consumers on multiple fronts. The crisis erupted on 28 February after joint US-Israeli strikes on Iran led to an on-and-off blockade of the critical shipping corridor. By severing 20 per cent of global oil shipments and liquefied natural gas (LNG) exports, the closure has sparked the largest shock to global energy supplies in modern history. For the UK, these elevated energy costs are are hitting utility bills, petrol pumps, and grocery aisles, eating directly into household budgets — drastically reducing the purchasing power of the pound. At the same time, central bank efforts to try and offset second-round inflationary effects have had “a stifling effect” on the national economy. The pressures come on top of existing strains from the ongoing war in Ukraine, which continues to disrupt European supply chains. While financial markets had originally expected the Bank of England to cut borrowing costs this year, persistent inflation has forced policymakers to leave interest rates unchanged, with traders now anticipating a potential rate hike before December. "A conflict fought thousands of miles away continues to bear on UK households, with real income erosion felt in the weekly shop, at the pump and on the energy bill," said Liam Daly, senior economist at the CEBR. "Until energy markets calm, the squeeze will persist." The economic pressure is expected to intensify over the coming months, when energy regulator Ofgem raises its quarterly price cap by 4 per cent in October. According to research by the Energy and Climate Intelligence Unit (ECIU), soaring oil and gas prices have already added £9.8 billion to household energy and transport bills. As reports that President Trump could turn the conflict into a “forever war," the think tank calculates that British energy consumers are paying an extra £190 million for every week the fighting drags on. Join our commenting forum Join thought-provoking conversations, follow other Independent readers and see their replies Comments [Image text:] Oran SPREADABLE BAKED BEANS CHICKPEAS PLAIN FLOUR RFOND Unbeatabled Price TOMATO PASSATA