UK GDP grew by 0.6% in January–March 2026 compared with the previous three-month period (October–December 2025), according to the House of Commons Library. By comparison, the Eurozone grew by just 0.1% over the same period. However, this relatively strong quarterly result contrasts with downgraded forecasts for the year as a whole: the Office for Budget Responsibility (OBR) had previously forecast annual growth of 1.1%, but independent forecasters have since revised this down to 0.6%, while the OECD lowered its forecast from 1.3% to 0.8%.
The reason for this divergence is the energy shock triggered by the conflict in the Middle East. On February 28, 2026, Israel and the US launched strikes against Iran; in response, Iran announced it would close the Strait of Hormuz — a passage for roughly one fifth of global oil and gas trade.
Shipping through the Strait has largely ceased, and despite a ceasefire announced on April 8, 2026, the Strait remains subject to a US naval counter-blockade. The first economic effects of the conflict are already showing up in real-time data and forecasts, though it remains to be seen whether the temporary supply chain disruption will lead to longer-term structural changes — such as diversifying supplier bases or rerouting trade flows.
The new parliamentary session began on May 13 with the King’s Speech, and the government already has a great deal to deal with in economic terms. Although both inflation and economic growth have beaten forecasts over the past month, there are signs that this may not last.
Key Facts:
- UK GDP: +0.6% in Q1 2026 (q/q); Eurozone grew just +0.1%
- Services output: +1.4% y/y; manufacturing output: +0.5% y/y
- Productivity: +0.9% q/q, +0.4% y/y
- Annual GDP forecast cut: OBR from 1.1% to ~0.6% (independent forecasters); OECD from 1.3% to 0.8%
- Driver of forecast revisions: closure of the Strait of Hormuz (from February 28, 2026) following Israeli/US strikes on Iran
- Strait of Hormuz: roughly 20% of global oil and gas trade; still under US naval counter- blockade despite the ceasefire (April 8, 2026)
- CPI inflation: 2.8% in April 2026 (down from 3.3% in March); Eurozone inflation moved the opposite way, rising from 2.6% to 3.0%
- Bank of England rate: held at 3.75% (decision of April 30); cumulative cuts of 1.5 percentage points since August 2024
- Unemployment: 5.0% (Jan–Mar 2026), employment at 34.39 million
- Public debt: 94.2% of GDP (April 2026) vs 93.7% a year earlier; 2025/26 borrowing was £129 billion (£23 billion less than 2024/25)
- Trade deficit: £13.7 billion (Q1 2026) vs £11.5 billion the previous quarter
Expert Insight (SWRR Centre):
This is a clear example of how an external geopolitical shock can translate almost immediately into macroeconomic forecasts for a developed economy, even without direct military involvement. The UK is not a party to the Gulf conflict, but as one of the most gas-dependent economies in the G7, it finds itself among the most exposed to its consequences — a clear case of how energy dependence becomes a transmission channel for crisis even for countries geographically removed from its epicentre.
The gap between the relatively strong quarterly figure (+0.6%) and the sharply downgraded annual forecast (from 1.1% to 0.6–0.8%) also illustrates a common problem in economic forecasting during an unfolding crisis: backward-looking data reflects the pre-shock economy, while forecasts attempt to account for a shock whose full effects have not yet worked through supply chains and prices. The fact that the temporary ceasefire (April 8) did not relieve economic pressure — the counter-blockade of the Strait of Hormuz remains in place — shows that a formal end to hostilities does not necessarily mean an end to a conflict’s economic consequences.
Sources:
House of Commons Library — “Economic indicators: Key statistics for the UK economy,”
Research Briefing, published May 27, 2026, updated June 14, 2026
House of Commons Library — “Iran announced it would close the Strait of Hormuz,” CBP-10636