UK economy faces £35bn blow and recession risk amid Iran war energy crisis

• The energy crisis resulting from the Iran war could reduce the UK economy by £35bn, even in an optimistic scenario, according to the National Institute of Economic and Social Research (Niesr).
• Niesr warns that a prolonged conflict in the Middle East could plunge the UK into recession during the latter half of this year.
• David Aikman, Niesr's director, described the forecasts as a “serious blow” to the government's economic growth ambitions, highlighting the UK's exposure to global energy shocks.
• The Bank of England is anticipated to raise interest rates, with Niesr predicting a rise to 4% in July, potentially reaching 5.25% if inflationary pressures from the conflict continue.
• Economic growth forecasts have been downgraded, and inflation is expected to peak at 4.1% in January, not returning to the 2% target until 2028, prompting the prime minister to warn of potential changes to shopping and holiday habits.

IN FULL

Middle East energy crisis could wipe £35bn off UK economy – even in best-case scenario, think tank warns