Higher energy prices from Middle East conflict set to leave typical working-age household £480 worse off in 2026-27

The Resolution Foundation estimates that the typical working-age household is set to be £480 worse off in 2026-27 than it would have been without the conflict in the Middle East, in research published on 15 April 2026¹. The estimate is based on market forecasts for the rise in energy prices from the end of the week commencing 6 April¹.

The think tank says the conflict has cut expected income growth across the distribution. Average income growth for the poorest fifth of working-age households is now put at 1.2 per cent for 2026-27, down from a pre-war forecast of 2.8 per cent¹. The middling working-age household, previously on track for 0.9 per cent growth, is now expected to see its income fall by 0.6 per cent, a difference of £480 over the financial year¹. The foundation says the estimate accounts for energy and food price rises hitting lower-income households harder, because essentials take a larger share of their budgets¹.

One group is expected to fare better. Families in the bottom half of the income distribution with three or more children are estimated to see year-on-year income growth of 7.7 per cent in 2026-27 even after the inflation shock, which the foundation attributes to the abolition of the two-child limit. That compares with an average of 0.0 per cent across all other families in the bottom half of the distribution¹.

The foundation also sets out an estimate for food prices: a 10 per cent rise in global food commodity prices would eventually push up the cost of food for UK households by about 2 per cent, with the peak impact felt more than a year after the commodity price rise, meaning the inflation shock could persist into 2027¹. It says energy bills are "all but certain to jump in the summer"¹. The foundation adds that the full economic effects cannot be established until it is known how the conflict develops and ends¹.

Why it matters for households

The figures describe a smaller increase in living standards than had been expected for 2026-27, and an outright fall for the middling working-age household, rather than a cut to existing incomes. The £480 figure is a shortfall against what the foundation had projected before the conflict, not a bill or a charge¹.

The effects are uneven. The poorest fifth still see incomes rise, but by less than previously forecast, while families with three or more children in the bottom half of the distribution are estimated to see growth of 7.7 per cent, which the foundation links to the abolition of the two-child limit¹. Households in the middle of the distribution are expected to see incomes dip¹.

Two channels are identified. Energy prices feed directly into bills, and the foundation says a summer jump is all but certain¹. Food prices respond more slowly: a 10 per cent rise in global food commodity prices is estimated to add about 2 per cent to UK food costs eventually, with the peak more than a year later, so the pressure could run into 2027¹. Energy prices in Northern Ireland operate under a separate market with no cap, which affects how price changes reach households there.

What happens next

The foundation says it will publish further work on the wider economic effects and what they mean for fiscal and monetary policy in the week after 15 April 2026¹. It has previously called for work on a social tariff to be accelerated ahead of winter¹. No date has been reported for a decision on that.