QNA / X
London: The UK faces a new wave of economic pressure as the repercussions of the war in Iran ripple through global markets.
Despite being continents apart, the interconnectedness of energy markets and supply chains impacts the daily reality of British families and businesses. UK Chancellor of the Exchequer Rachel Reeves warned that while "this is not our war, but it is pushing up costs for UK families and businesses," signaling a challenging phase marked by rising energy and commodity prices, and clouded by economic uncertainty.
Since the outbreak of the regional war in late February, the UK has been grappling with mounting cost-of-living pressures that analysts say have yet to peak. The war in Iran directly impacts energy, food, and transportation prices, presenting compounding challenges at a time when the economy has not yet fully recovered from the high inflation following the Russia-Ukraine war, which caused an energy shock and slowed economic growth in the UK.
At the heart of the current crisis lies the surging oil and gas prices driven by disruptions in global supplies from the Arabian Gulf and vital shipping routes, particularly the Strait of Hormuz. Higher energy bills have impacted transportation and production costs across various sectors.
In everyday life, the effects of the war are increasingly visible as they face higher energy bills, rising prices for basic goods, and more expensive travel costs, prompting them to change their consumption habits, such as reducing energy use at home or seeking cheaper alternatives to food products.
As these pressures continue, many families find themselves forced to rearrange their financial priorities and, in some cases, resort to savings or borrowing to cover basic expenses.
In this context, an expert on international affairs and director of the Council for Arab-British Understanding (Caabu) Chris Doyle told QNA that the closure of the Strait of Hormuz has had "enormous repercussions” on both the global and UK economies, adding that policymakers are yet unable to fully assess the scale of the damage of the war.
He noted that it is not just about oil and gas, but also other commodities such as helium, fertilizers, and rising food prices, further driving up living costs.
He pointed out that the state's general budget will bear a heavy burden due to increased government borrowing to provide bailout packages for companies to prevent their collapse due to rising costs, all at a time when the budget is already suffering from a deficit.
He explained that European governments, including the UK, will incur enormous expenses to support jobs and citizens, as was the case during the COVID-19 pandemic. With a high national debt, it is unclear how much the government can intervene to help the economy.
Despite promises made by UK Prime Minister Keir Starmer that the government would not stand idly by, he acknowledged that these global disruptions are beyond the control of any government. He said efforts are underway to mitigate the impact without jeopardizing fiscal stability.
The challenges faced by the UK economy can be felt by the average citizen, translated as higher prices and daily pressures. The government fears that the economic fallout from the war will be an external shock felt by almost every household and will not be easy to contain, UK Chief Secretary to the Prime Minister, Darren Jones, said. Jones, who is part of a government team developing a strategy to address the war's impact on the UK economy, warned that the pressures could persist even after the conflict ends, reflecting his concern about the prolonged nature of the crisis and its profound effect on the economy. The war's impact extends beyond energy, affecting food prices, a key component of every household's spending.
With rising fuel and transport costs, the cost of moving and storing goods has increased, as have the costs of agricultural and industrial production, including fertilizers, refrigeration, and manufacturing. Market estimates suggest that these combined factors are gradually driving up food prices, a trend consumers are already feeling in their daily shopping.
