UK consumer confidence has ‘collapsed’ during Iran war, retail industry says

UK consumer confidence has plunged sharply amid the Iran war, with the British Retail Consortium reporting a 64% majority expecting economic worsening over the next three months, pushing the net confidence balance down to -53%, compared to -20% a month prior. Rising energy prices, driven by strait of Hormuz disruptions, underlie fears of higher inflation and weaker growth for oil-importing countries like the UK. The ongoing conflict has also sapped optimism for personal finances in the UK, with the net balance dropping to -17 from -6 in February. Inflation held steady at 3% in February before the war escalated pressure on prices, notably petrol, which surged 9% recently. The Bank of England has paused interest rate cuts, indicating a possible future increase due to persistent inflation risks. The Food and Drink Federation warns that food price inflation is likely to accelerate as energy and input costs rise further. Market implications include potential downward revisions to UK growth forecasts and increased volatility in energy and commodity markets. Key near-term catalysts to monitor are further developments in Middle East tensions, associated energy price moves, and UK inflation data in coming months. Governments may also introduce targeted energy support policies impacting consumer spending and inflation dynamics. Amid this backdrop, UK trade bodies emphasize the need for businesses to maintain export momentum despite global uncertainties. The situation underscores the delicate balance central banks face between fostering growth and containing inflation in a geopolitically fragile environment.