Bank of England Iran-war scenario sends UK inflation to 6.2%

UK inflation is already at 3.3%, and the stress case now on the table pushes it back above 6%. The Bank of England’s new Iran-war scenario maps a 6.2% peak in early 2027 if energy prices jump and stay high, alongside a return to active rate hikes instead of a slow glide down.

That path includes Bank Rate heading to 5.25% by year-end after multiple increases, with the squeeze spreading fast: food inflation rising from 4.6% to 6-7% by late 2026, growth stuck at 0.1%, and sectors like hospitality exposed. Lower-income households take the hit first, and most food retailers are sitting on less than a month of cash.