The war involving Iran could push UK inflation about one percentage point higher this year if energy prices remain elevated, according to a senior member of the Office for Budget Responsibility.
Professor David Miles warned that the surge in oil and gas prices triggered by the conflict is already feeding into the inflation outlook.
He told MPs at the Treasury Select Committee, the spike in energy markets since the conflict escalated has been substantial and could quickly filter through to household costs and wider prices across the economy.
Miles said: “If energy prices were to stay where they are now for the rest of the year it would probably add something like about one percentage point to the inflation rate.”
That increase alone could push inflation closer to 3% rather than the roughly 2% previously expected.
Energy prices surged after the outbreak of fighting raised fears about disruption to oil and gas flows from the Middle East.
The region remains one of the most important centres of global energy production and transport with a significant share of the world’s oil shipments passing through the Strait of Hormuz.
Economists say shocks in global fuel markets tend to feed rapidly into inflation because they affect transport costs electricity prices and the cost of producing goods.
Miles suggested the current inflation outlook depends heavily on how long energy prices remain elevated.
He told MPs: “It depends how persistent this is and whether energy prices stay at these higher levels.”
If prices fall back the impact on inflation could prove temporary. However sustained volatility in global energy markets could complicate efforts by the Bank of England to bring inflation back towards its 2% target.
Higher inflation driven by energy costs could also delay expectations of interest rate cuts if policymakers fear the spike could become embedded in wider prices.
Copyright © 2026 Energy Live News LtdELN