UK economy records surprise 0.3% growth in first month of the Iran war

UK GDP surprised to the upside in March, rising 0.3% m/m versus economists’ expectations for a 0.2% contraction, with Q1 GDP up 0.6% after 0.1% in Q4 2025. The data suggests the early economic hit from the Iran war and the spike in oil and gas prices has been less severe than feared so far, even as the closure of the Strait of Hormuz has driven a sharp energy shock. The ONS also revised prior months lower, but the broader tone remains resilient: February growth was revised to 0.4% from 0.5%, while January was unchanged at 0%. Business surveys and retail sales have held up better than expected, with April PMIs showing activity rising in both manufacturing and services. That said, inflation accelerated to 3.3% in March from 3.0% in February, and the Bank of England has warned that “higher inflation is unavoidable” if the war-driven energy shock feeds through to wages, investment and supply chains. For precious metals, the immediate read-through is mixed: stronger UK activity could temper safe-haven urgency, but the combination of higher inflation, tighter policy risk and geopolitical energy stress remains supportive for gold on dips. Near term, the key catalyst is whether the inflation shock starts to damage real income growth and business confidence; if it does, the market may shift back toward recession/hedge demand rather than growth optimism.