Middle East energy crisis could wipe £35bn off UK economy – even in best-case scenario, think tank warns
A leading think tank has warned that the Middle East energy crisis triggered by the Iran conflict could reduce the UK economy by £35bn, even under the best-case scenario. The National Institute of Economic and Social Research (Niesr) forecasts slower growth, higher inflation, and rising interest rates, undermining the government's economic recovery plans. Prolonged hostilities could push the UK into recession by late 2026. Prime Minister Keir Starmer acknowledged the economic impact but urged the public not to panic.
- ▪The National Institute of Economic and Social Research (Niesr) estimates the UK economy could be £35bn smaller in 2026 and 2027 due to the Middle East energy crisis.
- ▪Even with a swift resolution, UK economic growth is forecast to slow to 0.9% in 2026 and 1% in 2027, down from 1.4% in 2025.
- ▪Niesr predicts UK inflation could peak at 4.1% in January 2027 and not return to the 2% target until 2028.
- ▪The Bank of England may raise interest rates to 4% in July 2026, and up to 5.25% if inflationary pressures persist.
- ▪Prime Minister Keir Starmer warned of lasting economic effects, including changes to consumer spending and travel habits, despite current confidence in energy supply.
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NewsUKUK PoliticsMiddle East energy crisis could wipe £35bn off UK economy – even in best-case scenario, think tank warnsImpact of Donald Trump’s Iran war a ‘serious blow’ to Keir Starmer’s economic hopes, Niesr said Kate Devlin Whitehall Editor Wednesday 29 April 2026 00:01 BSTBookmarkCommentsGo to commentsBookmark popoverRemoved from bookmarksClose popover{"translations":{"comments":"Go to comments","share":"Share","copyLink":"Copy link","bookmark":"Bookmark","removeBookmark":"Remove bookmark"},"showComments":true,"showBookmark":true,"articleId":"b2966540","articleMeta":{"url":"https://www.independent.co.uk/news/uk/politics/uk-economy-energy-crisis-middle-east-niesr-b2966540.html","title":"Energy crisis could wipe £35bn off UK economy – even in best-case scenario"}}Starmer tells Britons…
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