silverguide.site –

Higher energy prices as a result of the Iran war are likely to deal a blow to Britons’ living standards, leaving them nearly £500 worse off this year, a thinktank has warned.

The Resolution Foundation said households faced rising costs from both higher gas and electricity bills and at the petrol pump.

Market pricing suggests that rising energy prices will likely tip living standards growth into negative territory, the thinktank said on Monday. Its research showed the typical working-age household, which had been on track for 0.9% income growth this year before the Iran war started, could now see income fall by 0.6% – a difference of £480.

Oil and gas prices have risen sharply since the start of the war in late February and increased again on Monday, with Brent crude back above $100 (£74) a barrel.

While some lower-income households are receiving a long-overdue real-terms increase in their benefits, the foundation estimates that average income growth for the poorest fifth this year will be just 1.2%, rather than the 2.8% forecast before the US and Israel launched attacks on Iran on 28 February, unleashing a wider Middle East conflict.

Israel continues to bomb Lebanon despite a two-week ceasefire agreed between the US and Iran last Wednesday, and Donald Trump’s blockade of the strait of Hormuz and Iranian ports, taking effect on Monday, threatens to escalate the conflict again after US peace talks with Iran failed.

The picture is brighter for UK families in the bottom half of the income distribution with three or more children, the thinktank said. Even after the inflation shock, the abolition of the two-child limit is estimated to deliver 7.7% income growth for this group this year – compared with zero growth for poorer families with fewer than three children.

Jonathan Marshall, the foundation’s principal economist, said energy bills were set to rise this summer, wiping out the £117 average savings per household arising from the regulator lowering its energy price cap from April.

Analysts are expecting crude oil prices to stay elevated in the months ahead, with JPMorgan Chase forecasting levels above $100 a barrel in the current quarter to June, followed by an easing in the second half of the year. Last week, Goldman Sachs lowered its forecast for Brent crude to average $90 a barrel in the second quarter, from $99 previously.

The foundation urged the government to accelerate work on a social tariff ahead of winter, when energy costs will hit hardest, to offer targeted support to struggling households.

James Smith, chief economist at the Resolution Foundation, said: “Despite hopes for a sustained peace, the path of this conflict remains uncertain and energy prices remain well above pre-war levels, meaning many households face a decline in their purchasing power this year.

“De-escalation is certainly welcome, but damage to household finances this year is to a large degree already done. The government should act now to prepare a social tariff that reaches households falling through the cracks this winter.”