The International Monetary Fund has flagged escalating tensions in the Middle East as a significant headwind for the United Kingdom's near-term economic outlook, even as the broader economy demonstrates resilience.
The assessment comes as the IMF Executive Board completed its Article IV Consultation for the UK, underscoring the vulnerability of global growth to geopolitical shocks.
The fund's review suggests that while domestic fundamentals remain stable, external risks are intensifying.
This complicates the policy path for the Bank of England, which has previously been cautioned by the IMF against moving too quickly to cut interest rates despite a softening inflation outlook.
The central bank must now balance domestic disinflation trends against the potential for renewed energy price volatility stemming from regional instability.
Recent IMF analysis had revised UK inflation projections downward, citing the cooling impact of an interim peace deal between the United States and Iran on global oil markets.