UK growth strong before energy shock
Early gains face risks from rising costs
The United Kingdom economy grew more strongly than expected before the escalation of the Iran conflict, but economists warn that a subsequent energy shock could significantly test economic resilience in the months ahead.
Official data showed that UK GDP expanded by around 0.5% in February, driven by a broad recovery in services, manufacturing, and construction activity, marking one of the strongest monthly performances since early 2024. The improvement suggested a solid start to the year and a temporary rebound in business activity before geopolitical tensions intensified.
However, that momentum has been overshadowed by the outbreak of war involving Iran, which has disrupted global energy markets and pushed up oil and gas prices. Economists say the UK is particularly exposed due to its reliance on imported energy, making households and businesses vulnerable to external price shocks.
Analysts warn that rising energy costs are likely to feed into inflation, increase living expenses, and reduce consumer spending power. Businesses are also expected to face higher input costs, which could slow investment and hiring decisions across key sectors of the economy.
Financial institutions and policy groups have already downgraded growth forecasts for the remainder of the year, with expectations that early gains in 2026 could be reversed if energy prices remain elevated. Some analysts also suggest that inflationary pressures may force central banks to reconsider the timing and scale of any interest rate cuts.
Despite the short-term shock, some economists argue the impact may ease if energy markets stabilize and supply chains adjust. However, they caution that prolonged instability in the Middle East could keep inflation high and prolong uncertainty for global markets.
Overall, the UK economy enters the second half of the year with stronger-than-expected early growth, but facing significant headwinds from geopolitical tensions and rising energy costs that could determine its trajectory in the months ahead.
