IMF Says UK Economy Hit Hardest by Iran War, Why?

LONDON – Geopolitical tensions in the Middle East stemming from the Iran war are deemed to be pressuring global economic prospects, with the most significant impact on UK growth compared to other advanced economies.

The International Monetary Fund (IMF) in its April 2026 World Economic Outlook report, published on Tuesday (14/4/2026), has cut its UK economic growth projection to just 0.8% in 2026, down from the previous estimate of 1.3%.

This revision is the largest among G7 countries.

The institution assesses that the pressure on the UK economy stems not only from the conflict but also from more limited expectations for interest rate cuts and the lingering effects of rising energy prices.

The IMF describes the UK as one of the countries most vulnerable to energy price surges due to its status as a net energy importer. This makes the nation’s economy highly sensitive to global oil price volatility triggered by the conflict.

Additionally, the IMF forecasts that UK inflation will be among the highest in the G7. Inflation is projected to reach 3.2% this year and 2.4% in 2026, equivalent to the US over the same period.

This aligns with the easing of energy price hike impacts and slowing wage growth due to a weakening labour market.

In response to the projections, UK Chancellor Rachel Reeves stated that the Iran conflict would bring economic consequences for her country.

“The war in Iran is not our war, but it will bring costs to the UK. This is not a cost I want, but it is a cost we must address,” Reeves said, quoted from BBC on Thursday (16/4/2026).

“There is not much room to increase spending to support households and businesses,” said Gourinchas.

He added that if aid policies are implemented, they must remain within existing budget limits.

Globally, the IMF estimates world economic growth at around 3.1% this year, down from 3.4% in 2025. Gourinchas described this revision as a “significant downgrade”.