The UK is expected to suffer the largest economic hit among major global economies from the ongoing Middle East conflict, according to the OECD, which has sharply downgraded its growth forecasts and warned of rising inflation risks.
In its latest outlook, the OECD cut the UK’s growth forecast for 2026 to just 0.7 per cent, down from a previous estimate of 1.2 per cent, placing it among the weakest performers in the G20. Only Italy is expected to record slower growth among the G7 economies, while the UK is also forecast to experience one of the highest inflation rates in the group.
The downgrade reflects the UK’s vulnerability to rising energy costs, which have surged following the escalation of the US-Israel conflict with Iran. Disruptions to oil and gas supplies, particularly through the Strait of Hormuz, have driven up wholesale prices, feeding directly into inflation and dampening economic activity.
The OECD warned that a prolonged conflict could lead to “significant energy shortages” globally, with knock-on effects including higher fertiliser costs, reduced crop yields and a potential spike in food prices next year.
For the UK, which remains heavily reliant on imported energy, the impact is particularly acute. Rising fuel costs are already being felt at petrol stations and in heating bills, while businesses are facing higher input costs across supply chains.
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