Britain’s fiscal watchdog warns borrowing will rise sharply due to escalating energy costs from the Iran conflict.
The UK Office for Budget Responsibility (OBR) revised its borrowing forecasts upward, citing heightened energy price risks from the Iran war. The agency acknowledged underestimating the fiscal impact of the previous energy shock following Russia’s invasion of Ukraine, which drove gas prices up fivefold.
The OBR’s review of its forecasting models highlighted that the Ukraine war increased government borrowing and debt significantly. Analysts now expect a similar or worse outcome as geopolitical tensions disrupt global energy markets.
Chancellor Rachel Reeves faces pressure to address the deteriorating fiscal outlook amid rising debt servicing costs and weaker economic growth projections.