The Iran war has overturned the UK’s economic recovery

London — With oil prices soaring and stocks tanking, the fast-evolving Iran war has cast a pall over economic forecasts to be unveiled by British Treasury chief Rachel Reeves on Tuesday.

Reeves’ statement to the House of Commons was expected to be relatively low-key business, with forecasts showing key economic numbers broadly heading in the right direction.

However, economists are warning that an Iran war could raise forecasts, dampen growth, raise inflation and increase debt within his spring statement. Perhaps most notably, Brent, the international oil benchmark, is up more than 15% this week above $80 a barrel, which if sustained will surely lead to higher energy bills and inflation and put a lid on growth.

“As the world plunges into fresh uncertainty, they are likely to strike a more cautious tone, focusing on maintaining stability and sticking to fiscal rules amid heightened tensions,” said Susanna Streeter, chief investment strategist at investment service Wealth Club.

Ahead of his remarks, the Treasury said Reeves would stress the importance of financial stability in an increasingly uncertain world.

Reflecting on the decisions taken by the government, Reeves is expected to point to already falling inflation and interest rate cuts, which will reduce the cost of living on family finances.

“This government has the right economic plan for our country, in what is still a very uncertain world,” he is expected to tell lawmakers.

Britain’s Labor government, which has lost significant support since winning the general election in 2024, hopes that 2026 will be the year when it is clear that the British economy is on better footing than it has been for years.

Some recent economic indicators have pointed to a pickup in growth in the early part of 2026. Inflation will fall sharply in the coming months, prompting the Bank of England to cut interest rates further. Last month, the bank kept its key rate unchanged at 3.75%.