Financial markets swooned and oil prices jumped again on Friday as Iran poured cold water on reports that it was negotiating with the Trump administration to bring the war to an end.
The US president’s decision to extend a pause on attacking Iranian energy facilities until April 6 has failed to calm traders, and some analysts believe the UK economy would be harder hit by a protracted conflict than most others.
The Organisation for Economic Co-operation and Development (OECD) slashed its forecast for UK growth this year to 0.7%, a sharp reduction from its previous expectation of 1.2%, leaving Britain in bottom place among leading industrialised nations for 2026.
That’s because the UK is heavily reliant on imported fuel and more sensitive than other countries to energy price volatility, the OECD said, meaning its economy could face a heavy blow if the war drags on.
Haldane believes that weakness strengthens the case for BoE rate cuts rather than pauses, even though that outlook could change if energy prices continue to climb – a potential “game changer” for the central bank’s rate strategy.