Iran War Costs UK Economy £25 Billion in Added Expenses, June 10

Operation Epic Fury, which began on 28 February 2026 with US and Israeli airstrikes on Iran, has triggered an economic crisis far beyond military casualties. A Reuters survey of 279 companies found the conflict has created £25 billion in additional costs across the global economy. Energy disruption and supply chain chaos now threaten UK growth just as inflation pressures were expected to ease.

How the Strait of Hormuz Became a Chokepoint

The Strait of Hormuz carries 20 million barrels of crude oil per day, roughly one-fifth of global petroleum consumption. When Iran closed the Strait in early March 2026, it stranded 13 million barrels per day of Gulf exports. Saudi Arabia and the UAE redirected 7 million barrels through alternative pipelines, but Iraq, Kuwait, Qatar, and Bahrain had no escape route. Their oil and gas became trapped, creating what analysts call the Hormuz paradox: the countries causing the price spike could not get their product to market.

Energy Prices Surge, Hitting Multiple Sectors

Brent crude surged above US$100 per barrel in late April, reaching US$110 by mid-May. A Reuters survey identified aviation as the hardest-hit sector, facing £15 billion in additional costs. Auto and supply chain sectors absorbed £5.5 billion, while consumer goods faced £2.4 billion. Diesel fuel prices in the UK were 38% higher in April 2026 than a year earlier, adding pressure to plant operation and construction logistics. The 2026 Global Peace Index documented the largest supply disruption ever recorded in the global oil market.

UK Construction Faces Dual Pressure

The UK construction sector now experiences rising cost pressures at the same time as activity weakens. This combination is unusual. Previous shocks brought either strong inflation or weak demand, but not both simultaneously. Aluminium prices rose from £2,967 per tonne in early January to £3,769 per tonne by late May. Natural gas prices remain elevated. Inflationary pressures are expected to build in coming months as the energy shock spreads through the economy.

Supply Chain Disruption Spreads Beyond Energy

The conflict disrupts more than oil and gas. LNG supplies are constrained. Iranian strikes on Ras Laffan in March 2026 affected approximately 17% of Qatar’s LNG export capacity. Aluminium shortages affect auto and aerospace manufacturers. Helium shortages impact MRI scanner production. A fertiliser shortage would ripple through farming, retail, and food prices. Underwriters report 73% of respondents agreed the war has highlighted unquantified areas of risk in ports and airports.

Final Thoughts

The Iran war has created £25 billion in added costs across 279 surveyed companies, with energy and supply chain disruption expected to push UK inflation higher in the coming months. Investors should monitor energy prices and construction sector weakness as dual pressures weigh on growth.

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