Britain faces one of the largest shocks from the Iran war, the International Monetary Fund has warned.
The IMF said the UK economy is especially exposed because it relies heavily on gas‑fired power. In addition, the IMF compared the effect of rising energy prices to a “large sudden tax on income” for households.
Furthermore, it highlighted that the blockage of the Strait of Hormuz and damage to regional infrastructure have caused the biggest disruption to the global oil market in history. Meanwhile, the organisation warned that the war could push food prices higher by disrupting fertiliser shipments from the Gulf.
“The interruption of crop-nutrient supplies comes just as planting season begins in the Northern Hemisphere,” the IMF said. “It threatens yields and harvests, which could push food prices across the year.” Countries with high energy imports, such as the UK and Italy, face the most pressure. On the other hand, France and Spain benefit from nuclear and renewable energy sources.
Low-income countries remain the most vulnerable. People there spend a higher proportion of their incomes on food, which could worsen inequality. Meanwhile, Sir Keir Starmer met business and military leaders at Downing Street on Monday to discuss the economic impact of the war.
Representatives from Shell, BP, Maersk, Lloyd’s of London, HSBC, and Goldman Sachs attended.
Starmer said it must be a joint effort to manage the crisis. “The government can’t do it on its own. You can’t do it on your own. We must work together,” he said. He will chair a Cobra meeting today to examine contingency plans and discuss ways to protect households from rising costs.
Oil prices have surged because Iran has restricted tanker passage through the Strait of Hormuz. Consequently, petrol costs at the pump are rising. As a result, pressure is increasing on the government to delay a planned fuel duty hike in September. Chancellor Rachel Reeves faces calls to follow European countries in measures to shield consumers from soaring fuel prices.
Although the IMF warned that all roads lead to higher prices and slower growth, the government has stressed it is working to stabilise supplies. Furthermore, the IMF added that the final impact depends on the duration of the war and the extent of infrastructure damage.
Prolonged conflict could leave energy expensive, inflation high, and economic growth slow, it said. Therefore, energy crisis experts say the UK must act quickly to protect households, maintain supply, and stabilise prices while pursuing diplomatic solutions in the Middle East.
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