Revealed: How much Iran war has cost UK households

It’s more than you think

With still no end in sight, the world economy is seamlessly being affected, down to the households of those that aren’t involved in the dispute.

The Centre for Economics and Business Research (CEBR) has calculated that the leap in inflation added with a weak wage growth will knock £70.4 billion off UK households’ disposable income.

When talking about the individual households the amount comes up to £1,100 on average in 2026, and bumped to £1,300 in 2026.

When looking at the Iran war timeline from its beginning to 2027, the average household will have suffered from a £2,400 financial hit, according to the new CEBR analysis.

The primary reason for the shock in UK household costs stems from the closure of the Strait of Hormuz, affecting two channels, according to CEBR senior economist Liam Daly.

“The first is direct: higher energy costs feed straight into bills and into the price of almost everything else, so each pound of pay buys less,” he said.

“The indirect channel is slower but as important, running through monetary policy and the labour market.”

Prior to the war, interest rates in the UK were expected to be cut in 2026 by the Bank of England.

However, nothing has changed since then as the UK’s growth has been stunted by increasing energy costs.

Daly said: “A conflict fought thousands of miles away continues to bear on UK households.” 

He added that real income erosion was “felt in the weekly shop, at the pump and on the energy bill. 

“Until energy markets calm, the squeeze will persist.”

Ofgem came to a decision to increase quarterly prize caps on energy bills to 4%, an increase scheduled to hit households in October.