OBR warns Iran conflict could hit UK economy as Reeves touts stability

Chancellor Rachel Reeves has used the Spring Statement to champion the 'stability' of the UK's public finances, even as official forecasts downgraded economic growth for 2026 and predicted a rise in unemployment to 5.3%. While the Office for Budget Responsibility (OBR) projected that public finances are moving in the right direction, the outlook is clouded by several factors, including lower-than-expected immigration and rising defence spending. The precarious fiscal picture is significantly complicated by the potential economic fallout from conflict in the Middle East, particularly involving Iran. The OBR issued a stark warning that such an event could inflict a 'very significant' hit on the UK economy, likely through soaring oil and gas prices that would trigger another energy shock. Economists suggest this external threat could undermine the Chancellor's plans. Despite the downgrades and external risks, Reeves defended her strategy, insisting Labour has the 'right economic plan' for an uncertain world. She emphasized that unemployment, after peaking later this year, is forecast to fall annually until 2030. However, critics argue her attempt to project calm may be short-lived if living costs continue climbing, exposing the limits of rigid fiscal rules and raising the question of who will ultimately absorb the economic losses—the state, businesses, or households.