The UK is set to suffer the largest economic blow among major global economies due to the conflict with Iran, according to the Organisation for Economic Cooperation and Development (OECD). Growth forecasts for 2026 have been slashed from 1.2% to 0.7%, the steepest downgrade in the G20, while inflation is expected to surge to 4% this year.
The OECD warned that disruptions to oil, gas, and fertiliser supplies could drive food prices higher if the conflict persists. UK inflation is now projected to average 4% in 2026, up from a previous 2.5% forecast, before easing to 2.6% in 2027, still above the earlier estimate of 2.1%.
US President Donald Trump criticised Prime Minister Sir Keir Starmer for refusing to allow US forces to use RAF bases in initial attacks, and dismissed British aircraft carriers as “toys”. The OECD cautioned that a further sharp rise in energy prices could cut European growth by 0.4% this year and 0.8% next, pushing economies like the UK closer to recession.
Chancellor Rachel Reeves announced that banks have agreed to proactively contact 1.6 million mortgage customers whose fixed-rate deals end this year, offering support such as temporary interest-only payments. Shadow Chancellor Sir Mel Stride blamed Labour’s policies for the economic vulnerability, citing increased borrowing, spending, and reliance on imported energy.
