The UK is expected to face the largest impact on economic growth from the Iran war among G20 major economies, according to the Organisation for Economic Co-operation and Development (OECD).
The OECD has downgraded its forecast for the UK's economic growth this year to 0.7%, down from its previous forecast of 1.2%, as reported by the BBC. Inflation is also predicted to be higher than expected, at 4% this year, up from the previous estimate of 2.5%.
The OECD's global growth forecast for this year remains unchanged at 2.9%, but it predicts inflation across the G20 countries will be sharply higher than previously forecast. The effects of the war are already being felt in the UK, with higher petrol and diesel prices, and increased costs for heating oil users.
Impact on Businesses
UK businesses are also feeling the impact, with mortgage lenders raising rates and axing hundreds of deals. Stuart Machin, chief executive of UK retailer M&S, said "policy costs" on the company's energy bill had "skyrocketed" in recent years, and were unsustainable for businesses.
Earlier on Monday, UK clothing retailer Next said it was likely to experience £15m in additional costs if the Iran war lasts for three months. These costs have been offset by savings elsewhere, but if the conflict continues for longer, the company may pass costs through as higher pricing.
Government Response
Chancellor Rachel Reeves said the Iran war would affect the UK, but "in an uncertain world we have the right economic plan". However, shadow chancellor Sir Mel Stride called the downgrade a "damning verdict on how vulnerable our economy is thanks to Labour".
The OECD's outlook aims to give a guide to what is most likely to happen in the future, but forecasts can be incorrect and do change given the many factors that affect economic growth. The organisation said its predictions depend on the assumption that the current energy market disruption eases, with oil, gas and fertiliser prices falling from summer onwards.
