UK economy grows 0.3% in March despite Iran war

The Unexpected Growth

The UK economy unexpectedly grew during the first full month of the Iran war, according to official figures, suggesting the Middle East conflict has not yet affected growth as much as feared.

March GDP Growth

Figures from the Office for National Statistics (ONS) showed growth of 0.3% in gross domestic product (GDP) in March, from a revised 0.4% rise in February and 0% growth in January.

• Economists had forecast GDP would shrink by 0.2%.
• Over the first three months of 2026, GDP rose 0.6%, up sharply from growth of 0.1% in the final three months of last year.

The Impact of the Iran War

The March figure is one of the first official signs that the Iran war – which broke out on the final day of February – is not affecting activity for businesses and consumers as badly as expected, despite soaring oil and gas prices due to the closure of the strait of Hormuz.

Business Surveys and Future Outlook

The GDP reading ties in with some business surveys that suggest the economy has managed to maintain momentum despite the Middle East conflict.

• The closely watched purchasing managers index (PMI) for the UK showed business activity rising in April due to upturns in manufacturing production and output from the services sector.
• Retail sales also rose in March, even when excluding the increased cost of fuel, according to the ONS.

The Future Economic Landscape

However, the Bank of England warned last month that the UK may also need to brace for higher interest rates in the coming months as “higher inflation is unavoidable” because of the war in the Middle East.

• Inflation rose to 3.3% in March from 3% in February, after the Iran war triggered the biggest jump in fuel prices for more than three years.