Economists warn that the conflict in Iran could push Britain’s unemployment rate above 5.5 per cent within months, leaving more than 100,000 additional people out of work. Higher energy prices, disrupted supply chains and delayed interest rate cuts are expected to weigh heavily on businesses already grappling with weak demand and rising costs.

Oil prices have surged above 100 dollars per barrel, exposing Britain, which imports most of its energy, to sharper cost pressures. Analysts say prolonged instability could intensify inflation and force companies to cut jobs or freeze hiring as they attempt to offset mounting expenses.

The labour market was already under strain, with unemployment at its highest level since the pandemic and economic growth stalling before the conflict began. Business groups report collapsing demand in manufacturing and deteriorating consumer confidence, raising fears of stagflation marked by stagnant growth, rising prices and higher unemployment.

The Bank of England now faces a difficult balancing act as it considers interest rate policy. While rates are widely expected to remain unchanged in the near term, weaker growth and persistent inflation could complicate future decisions and deepen the risk of a prolonged downturn.