Bank of England issues economy warning amid US-Iran war: 'Keeps me up at night!'

Patrick O'Donnell
Fri, 24 Apr 2026 06:51:15 +0000

The Bank of England has issued a dire warning regarding the economy amid the ongoing conflict in the Middle East.

Sarah Breeden, the central bank's deputy governor for financial stability, has cautioned that worldwide equity markets may be heading for a decline, noting that valuations remain elevated despite mounting economic pressures.

She said: "There's a lot of risk out there and yet asset prices are at all-time highs. We expect there will be an adjustment at some point."

The deputy governor revealed that the prospect of several economic threats materialising simultaneously is what keeps her "awake at night."

Her warning coincided with the release of fresh inflation figures that underscored price pressures worsened by the US-Iran war.

Figures from the Office for National Statistics (ONS) revealed that consumer prices index (CPI) inflation climbed to 3.3 per cent in March, up from three per cent the previous month, matching forecasts from economic analysts.

Chancellor Rachel Reeves addressed the impact on households, stating: "The Iran crisis is not our war, but it is pushing up bills for families and businesses."

Rising motor fuel costs proved the primary factor behind the inflation uptick, with prices jumping 8.7 per cent month-on-month, representing the steepest monthly increase since June 2022 following Russia's invasion of Ukraine.

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According to ONS data, petrol prices rose by 8.6p per litre between February and March, reaching 140.2p per litre, the highest level recorded since August 2024.

Diesel saw an even sharper increase, climbing 17.6p per litre during March to average 158.7p per litre, a price not witnessed since November 2023.

The surge in fuel costs reflects the broader impact of geopolitical tensions on energy markets, with the Middle East conflict continuing to disrupt global oil supplies.

London equities finished marginally lower on Thursday, though markets staged a partial recovery after earlier steep declines as uncertainty surrounding the Strait of Hormuz and conflicting reports on US-Iran negotiations maintained elevated oil prices and dampened investor appetite for risk.

Before trading closed yesterday, the Ftse 100 shed 19.45 points, or 0.2 per cent, closing at 10,457.01 after dipping as low as 10,361.45 during the session.

Mid-cap stocks fared worse, with the Ftse 250 dropping 207.49 points, equivalent to 0.9 per cent, to finish at 22,764.52.

The AIM All-Share index also retreated, falling 5.99 points, or 0.7 per cent, to 802.13.