UK households to face £2,400 loss due to Iran conflict

Analysis from the Centre for Economics and Business Research (CEBR) indicates that the conflict involving Iran will result in an average loss of £2,400 in real disposable income for UK households by the end of 2027. The economic impact is projected to manifest as a £1,100 reduction in real income in 2026 and a further £1,300 reduction in 2027, totaling a £70.4 billion hit to UK household spending power.

The economic shock is driven by two primary channels. Directly, higher energy costs resulting from obstructed shipping through the Strait of Hormuz increase the price of goods and services. Indirectly, the conflict has influenced monetary policy; while interest rate cuts were previously anticipated, borrowing costs are expected to remain high as inflation pressures reignite.

Additionally, the CEBR notes that the conflict has contributed to a slowdown in wage growth and a defensive stance among firms regarding investment and hiring. The energy sector is also affected, with Ofgem recently lifting the quarterly price cap by 4% in Great Britain.