Iran War Energy Shock Could Push UK Inflation to 3% by Year-End, OBR Warns

The Office for Budget Responsibility warned Tuesday that the US-Israel war with Iran could add 1 percentage point to UK inflation by the end of 2026. Oil prices are currently about 20% higher than before fighting escalated, while gas prices have surged approximately 50%. Without those price changes reversing, OBR member Professor David Miles said UK inflation, previously forecast near 2%, could end the year closer to 3%. Analysts at Cornwall Insight separately forecast household energy bills could rise 10% from July, pushing Ofgem's price cap to £1,801 annually for a typical dual-fuel household, a £160 increase on April's cap. Chancellor Rachel Reeves warned the war would likely push inflation higher and met G7 finance ministers Monday to discuss a coordinated release of international oil reserves, though no agreement was reached.