IMF warns UK households face higher inflation as Middle East conflict lifts energy and food prices
The IMF says the war in the Middle East will keep energy and food prices volatile, pushing UK consumer inflation to 3.3% in 2026 and slowing growth in 2027.
By Felo News Desk · Published
The International Monetary Fund warned on Thursday that UK households will see inflation rise to 3.3% in 2026, higher than its earlier forecast, as the conflict in the Middle East lifts energy and food prices.
What happened
The IMF’s World Economic Outlook, released on 13 October, raised its projection for UK consumer‑price inflation in 2026 from 3.2% to 3.3%, marking the joint second‑highest rate among the G7. It also said growth is expected to slow next year and linked the upward pressure on prices to the ongoing war in the Middle East, which could keep energy and food prices “elevated and volatile”.
What the reports add
- Independent UK noted that the IMF flagged additional risks – extreme weather, cyber‑attacks and targeted strikes on energy infrastructure – that could compound price pressures.
- The Institute for Fiscal Studies warned that higher inflation will erode government department budgets, forcing either large cuts or tens of billions of pounds in extra spending, a concern echoed by Chancellor John Healey.
- Both Independent UK and the Standard reported that inflation is projected to ease to 2.8% in the year after 2026, still above the pre‑pandemic target of 2.4%.
- Office for National Statistics data show inflation rose to 3.1% in August and is expected to tick higher as household energy bills climb.
- The Bank of England said it expects UK inflation to lift to “slightly above 4%” in the first quarter of 2027, partly due to an anticipated rise in the household energy price cap.
What was said
A prolonged stalemate or further escalation in the Middle East could keep energy and food prices elevated and volatile.
— International Monetary Fund, cited by Independent UK
How it came about
The IMF’s warning follows a series of UK‑focused forecasts that have flagged rising living costs. On 30 September, Cornwall Insight projected the average dual‑fuel household energy bill to jump 16% to £1,999 a year in January, attributing the rise to the Iran‑related war in the Strait of Hormuz and low EU gas storage. Felo previously covered that forecast in UK energy bill forecast for January. The new IMF outlook adds a global dimension, tying UK price pressures to broader geopolitical instability.
Key facts
- UK consumer price inflation is projected at 3.3% for 2026, up from an earlier 3.2% forecast. (independent.co.uk)
- The IMF says the war in the Middle East could keep energy and food prices elevated and volatile. (independent.co.uk)
- UK economic growth is expected to slow in the year after 2026, according to the IMF. (independent.co.uk)
- Inflation is projected to ease to 2.8% in the year after 2026, still above the 2.4% pre‑pandemic target. (standard.co.uk)
