The Bank of England has warned that the ongoing conflict in the Middle East is delivering a major blow to the global economy, increasing financial risks worldwide.
In its latest financial stability report, the central bank described the situation as a significant supply shock, largely driven by rising oil prices, which are expected to fuel inflation and slow down economic growth.
The report also highlighted tighter financial conditions, including reduced lending by banks, as a likely consequence of the crisis.
According to the BoE, the current situation raises the risk of multiple economic vulnerabilities emerging at the same time, which could further destabilise the global financial system.
The bank noted that the conflict has added to an already fragile global environment, making economic conditions more uncertain than before.
It also cautioned that the ripple effects could disrupt essential financial services for households and businesses in the United Kingdom.
Despite these concerns, the BoE expressed confidence that the UK banking sector remains strong enough to support the economy even if conditions worsen.
Reacting to the situation, UK Prime Minister Keir Starmer reassured citizens that the country is prepared to navigate the challenges, emphasizing plans to emerge stronger from the crisis.
Meanwhile, Finance Minister Rachel Reeves acknowledged the pressure of rising costs, noting that not all price increases can be offset without triggering further inflation or higher taxes.