Iran conflict could slash UK growth to 0.3% next year, Treasury warns

In addition to the diminished growth prospects, inflation is also expected to rise significantly. The modelling suggests that inflation could peak at 4.3% in early 2027. This dual impact of reduced economic activity and increased prices underscores the potential severity of the economic consequences stemming from geopolitical instability affecting key global shipping routes.

The Strait of Hormuz is a critical chokepoint for global oil and gas shipments, and any sustained disruption poses a substantial risk to energy supplies and international trade. The Treasury's analysis aims to quantify the potential domestic economic fallout for the UK, informing government policy and preparedness in the face of such external shocks. The presented figures serve as a warning regarding the vulnerability of the UK economy to international conflicts and their ripple effects.