The Middle East crisis could trigger an energy price shock that more than wipes out the £300 rise in living standards a typical working-age household could otherwise expect this year, a leading thinktank has warned. The Resolution Foundation said a “decent” one-off increase in average living standards in 2026 and a bumper rise for lower-income households could be reversed by rising oil and gas prices as the Iran conflict disrupts supplies. However, if the recent jump in energy prices persists, the foundation said all the gains could be wiped out. While the effect may not be as large as the increase caused by the Russian invasion of Ukraine, which sent the cost of food, oil and gas soaring, a rise this year in oil and gas prices could add a percentage point to UK inflation and £500 on typical annual energy bills, it said. The UK’s reliance on gas from the Middle East makes it especially vulnerable to an effective blockade of the strait of Hormuz, through which about 20% of the world’s liquid natural gas is transported. According to the thinktank’s calculations in its analysis of Tuesday’s spring forecast, living standards for typical working-age households are on track to grow by £300 over the next year, or 0.9%. Lower-income households are set for a larger rise of £800, up 3.9%, mainly because of the lifting of the two-child benefit cap and an above-inflation increase in universal credit. This would be the second strongest year for living standards in the past two decades for poorer households. The research director, James Smith, said the government should consider developing a social tariff, to protect low-income households from any energy shock because an across-the-board support package had proven very costly in the past. “We have called for the government to develop the infrastructure for a social tariff. Targeting people with high energy needs and low levels of income. Liz Truss showed us that if you try to support people across the board, that is very expensive. “There is pressure from right and left on the government who say why are we worrying about [borrowing levels] and tightening our belts? This is exactly the reason. Because if the government says it can’t do things like energy support, you know it has a big problem.” The Institute for Fiscal Studies (IFS) echoed that argument against offering across-the-board energy support, as Truss’s government did in the wake of Russia’s invasion of Ukraine at the cost of £35bn. Helen Miller, the thinktank’s director, said: “This kind of government support is a key reason that debt has been rising in recent years. And, partly because bad shocks keep coming along, and partly because we are aiming only to stabilise debt in the better times, debt keeps rising over time. That can’t go on for ever. “The short answer is, rather than do something across the board, try to target help to where it’s most needed.” The IFS also laid out the trade-offs from accelerating the government’s pledge to spend 3% of GDP on defence. Bringing that target forward, to 2030, would cost £14bn a year, wiping out planned spending increases in every other area, unless taxes were raised to fund the rise. Ruth Curtice, the chief executive of the Resolution Foundation, said: “The immediate economic outlook for Britain is highly uncertain, with yesterday’s forecasts already looking out of date, while the living standards picture for the rest of the parliament is very lopsided. “This coming year is set to be a decent one for living standards, and a bumper one for poorer families, as wages and benefit support rise above the level of inflation. But a fresh energy price shock risks puncturing this good news.” The Joseph Rowntree Foundation said the situation could be even worse, arguing that Rachel Reeves’s claim that living standards will rise by £1,000 a year by the time of the next general election ignored pressures from housing costs. “Our modelling finds that average annual household disposable incomes are projected to grow by only £40 over the course of the current parliament (from April 2024 to April 2029) after adjusting for inflation,” it said. The chancellor’s claim is based on real household disposable income – a measure of inflation-adjusted wage growth that does not account for housing costs.
War in Middle East ‘could wipe out growth in UK living standards’
Rising oil and gas prices may affect increase of £300 a year for typical working-age households, says leading thinktank
Editorial Policy
GlobalFront.News adheres to strict journalistic standards for world conflict reporting.
Related Stories
Food crisis after fuel shock? Which countries may be at risk of wheat, rice, and cooking oil shortages amid the US-Israel war
A prolonged US Israel war may trigger a global food crisis, with rising fuel and fertiliser costs threatening vulnerable nations. The crisis is being driven by surging fuel costs, disruptions in shipping, and rising fertiliser prices.
Shell raises petrol to Rs 129, diesel to Rs 133 as Iran war drives fuel surge
Shell raises petrol and diesel prices sharply in India as Iran war drives crude surge, pushing fuel costs higher and increasing pressure on private retailers and consumers
'This Is Not Our War': UK Prime Minister Keir Starmer Rules Out Role In Middle East Conflict
UK Prime Minister Keir Starmer's statement was a response to Donald Trump, who recently criticised the group and called it a "paper tiger".
In Israel's north, war-weary residents feel abandoned by government
Whenever war rocks northern Israel, residents of Kiryat Shmona live their lives to the rhythm of rocket sirens. Young people have left the city, and those who remain feel neglected by the government.Some mere three kilometres (nearly two miles) from Lebanon, this northern town is living through its second war in less than three years, not counting Israel's 12-day war with Iran last June, or the war with Hamas in Gaza.