The UK economy contracted by 0.1% in April 2026, according to figures published by the Office for National Statistics on 12 June, as the impact of the US-Iran conflict began to filter through the economy via higher energy and fuel costs. The April print reversed momentum from a 0.3% expansion in March and met the consensus forecast from economists polled by Reuters.

A 0.2% contraction in services output was the primary driver of the negative reading, with the ONS identifying a 9.1% fall in sports, amusement and recreation activities as the largest negative contribution from a single industry to both services output and real GDP growth [Source: CNBC]. Construction output rose 0.1% over the month, providing a partial offset, while production recorded zero growth.

The ONS reported that companies cited pressure from the Middle East conflict, mainly relating to energy and fuel costs, with some suggesting an impact in April 2026 and for future months [Source: CNBC]. Iran's closure of the Strait of Hormuz, a key shipping route for global trade, drove the increase in energy prices. Around 20% of the world's oil and gas was transited through the strait before the war [Source: CNBC]. The UK, a net energy importer, has seen consumer prices rise during the conflict, largely driven by rising fuel costs.

The April contraction followed a strong start to the year. Monthly GDP grew 0.4% in February and 0.3% in March, after recording no growth in January. On a quarterly basis, the UK economy expanded 0.6% in the three months to March 2026, compared with 0.1% growth in the fourth quarter of 2025. The US-Iran conflict has now crossed the 100-day mark and has sparked supply constraints in global energy markets, prompting a resurgence of inflation.

The Bank of England held Bank Rate unchanged at 3.75% after its monetary policy meeting on 30 April, with one policymaker dissenting. Sterling was trading at $1.3401 against the US dollar on 11 June, up around 0.2% on the day, as the US dollar struggled to capitalise on a rise in inflation.

Sources: The Guardian, BBC Business, Bloomberg, CNBC, Exchange Rates UK, FXStreet