US and Iran War
For many UK company directors, conflict between the United States and Iran can seem like a distant geopolitical issue. But when tensions in the Middle East escalate, the commercial effects can reach UK businesses very quickly.
That is because this is not just about foreign policy. It is about oil, shipping, confidence, inflation and the day-to-day cost of trading.
As of 13 March 2026, the conflict has already disrupted oil flows through the Strait of Hormuz, pushed crude prices sharply higher, and triggered emergency action from the International Energy Agency.
Reuters reported Brent crude rising to around $100 per barrel, after briefly moving much higher during the recent escalation, while the UK Government has been discussing the economic fallout with G7 leaders and publicly stressing the need to manage the economic impacts of the conflict.
For UK businesses, the question is simple: what happens if another external shock pushes costs higher at a time when many firms are already dealing with tight margins, debt pressure and weak cash flow?
Why this matters to UK businesses
The most immediate issue is energy.
The Strait of Hormuz is one of the world’s most important oil shipping routes. When conflict threatens traffic through that route, oil prices tend to rise because global markets fear shortages, delays and supply disruption. Reuters has reported that the current conflict has already contributed to what the IEA described as the largest-ever oil supply disruption, with major pressure on prices and shipping.
That matters in the UK even if your business never buys oil directly.
Higher oil and energy costs can feed through into:
- Transport and delivery costs
- Supplier pricing
- Packaging and production costs
- Utility bills
- Consumer confidence
- Borrowing and investment decisions
The Office for Budget Responsibility has already warned in its March 2026 Economic and Fiscal Outlook that the conflict in the Middle East could have very significant impacts on the global and UK economies, particularly through energy markets, inflation and the fiscal position.
1. Fuel and transport costs could rise quickly
For many directors, this will be the first thing they notice.
If oil prices stay elevated, the cost of moving goods, travelling to jobs, running service vehicles or importing stock can all increase. Businesses with fleets, site-based teams, field engineers or regular deliveries are especially exposed.
Reuters reported on 12 March 2026 that oil prices jumped around 9% in one day as Iran said the closure of the Strait of Hormuz would continue, with attacks on tankers and disruption to Iraqi oil exports adding to market concern.
That can translate into real pressure for UK businesses through:
- Higher diesel and petrol costs
- Increased courier and haulage charges
- Shipping surcharges
- Rising supplier invoices
- Reduced margin on fixed-price work
If your business is already trading with little room for error, even a relatively short-lived spike in costs can cause problems.
2. Inflation could come back into focus
Many businesses have only just started to regain their footing after the last wave of inflation.
A fresh energy shock creates the risk of renewed cost pressure across the economy. The OBR has specifically flagged the Middle East conflict as a risk to inflation and to the wider UK economic outlook.
Its March 2026 presentation slides also noted that, as markets stood when it published, spot oil prices were around 20% above forecast and spot gas prices around 25% above forecast.
For UK businesses, that can mean higher costs for:
- Utilities
- Raw materials
- Food and commodities
- Manufacturing inputs
- Wages, as staff face higher living costs
Even businesses not directly affected by shipping or fuel may still feel the impact through supplier increases and weaker customer spending power.
3. Supply chains may become less predictable
Conflict in the Middle East can create disruption well beyond energy.
The UK Government has said the country’s gas supply is diverse and that direct disruption to UK gas supply is not expected, with only around 1% of UK gas supply in 2025 coming from Qatar.
That is reassuring, but it does not eliminate commercial risk for businesses. Energy prices are still set in global markets, and shipping disruption can affect costs and lead times even where UK domestic supply remains secure.
For businesses that import stock, components or raw materials, conflict can mean:
- Delayed shipments
- Higher insurance and freight costs
- Stock shortages
- Longer lead times
- More working capital tied up in inventory
That is particularly difficult for businesses already juggling creditor pressure, seasonal trading patterns or unstable cash reserves.
4. Cash flow could tighten further
This is where external shocks often become insolvency issues.
A business may survive one problem on its own. But when fuel rises, suppliers become more expensive, customer demand softens and HMRC or lenders still expect payment, the pressure can build very quickly.
For directors already dealing with:
- HMRC arrears
- Bounce Back Loan repayments
- Creditor threats
- Overdrawn director loan accounts
- Weak gross margins
- Poor forecasting
another shock may not create the problem, but it can expose how fragile the position already is.
That is the real reason this story matters. The US and Iran war is not just a headline. It is a reminder that businesses trading on thin margins can be pushed into distress by events far outside their control.
5. Business confidence may weaken
Periods of conflict tend to make both businesses and consumers more cautious.
The Prime Minister said on 11 March 2026 that G7 leaders had discussed action to manage the economic impacts of the conflict, while the Chancellor said in her Spring Forecast speech that unfolding conflict in Iran and the Middle East added to uncertainty and required the government to protect the economy from shocks.
In practice, uncertainty often leads to:
- Delayed customer decisions
- Reduced discretionary spending
- Slower investment
- Postponed recruitment
- More cautious lending and credit decisions
This can create a knock-on effect across the economy, especially for SMEs that rely on steady demand and prompt payment.
6. There may also be cyber and operational risks
One angle many businesses overlook is cyber risk.
The UK Government’s March 2026 cyber security newsletter said the National Cyber Security Centre was advising organisations to review their cyber security posture following the conflict.
It said there was likely no major direct change in the cyber threat from Iran to the UK, but there was almost certainly a heightened risk of indirect cyber threat for organisations with a presence or supply chains in the Middle East.
That means some UK businesses may also want to review:
- Supplier risk
- Access controls
- Phishing awareness
- Incident response planning
- Business continuity arrangements
This is especially relevant for companies operating internationally or relying on digital supply chains.
Which UK businesses could be hit hardest?
Not every business will feel the impact in the same way.
The businesses most exposed are usually those with:
- High transport or logistics costs
- Energy-intensive operations
- Imported materials or goods
- Fixed-price contracts
- Thin margins
- Limited cash reserves
- Existing debt pressure
That can include manufacturers, logistics firms, trades, wholesalers, retailers, hospitality businesses and construction companies, but the wider impact can spread much further if inflation and confidence both worsen.
What should directors do now?
The best response is usually calm, early action rather than panic.
Update your cash flow forecast
Review the next 13 weeks properly. Build in the possibility of higher fuel, freight, utilities and supplier costs.
Stress test your margins
Look at what happens if a key cost rises further. If profitability disappears too easily, you may need to act sooner than planned.
Speak to suppliers early
Ask whether pricing, lead times or payment terms are likely to change.
Tighten credit control
Late payment becomes even more dangerous during periods of uncertainty.
Review exposure to fixed-price work
If you are locked into quoted jobs but your input costs are rising, margin erosion can happen fast.
Check your resilience
If the business is already relying on HMRC arrears, short-term borrowing or supplier goodwill, it is worth confronting that reality now.
Take advice early
Directors usually have more options when they act early rather than waiting for pressure to become unmanageable.
Could this lead to more UK business distress?
It could.
That does not mean every business will be badly affected, and it does not mean the UK economy is about to grind to a halt. But it does mean that already-fragile businesses may face another wave of pressure just as they are trying to stabilise.
The OBR has been clear that conflict in the Middle East creates material risks to the UK economy through energy markets and inflation, while current reporting shows the market disruption is already significant.
For some businesses, that will simply mean tighter margins. For others, it may accelerate a wider cash flow crisis.
Final thoughts
The human cost of war is always the most important issue. But from a business perspective, directors also need to understand the commercial consequences.
The US and Iran war could affect UK businesses through higher fuel costs, supply chain disruption, inflation, weaker confidence and increased pressure on cash flow. Even if the UK’s direct energy exposure is limited, global markets do not stay neatly contained.
For directors already worried about rising costs or mounting debt, this is the sort of external shock that can make an already difficult situation worse.
That is why early action matters.
If your company is already under pressure, getting advice sooner can give you more options and more control over what happens next.
FAQ’s
Will the US and Iran war affect UK businesses?
Yes, it can. The main routes are higher oil prices, more expensive transport, supply chain disruption, inflationary pressure and reduced business confidence.
Why does conflict in the Middle East affect UK business costs?
Because the region plays a major role in global energy supply and shipping. If conflict disrupts oil flows or maritime trade, prices can rise internationally, which then feeds into UK business costs.
Will UK energy supplies be disrupted?
The UK Government says it does not expect UK gas supply to be disrupted and notes that the UK has diverse sources of supply. But businesses can still be affected by higher global prices and market volatility.
Which businesses are most vulnerable?
Businesses with high fuel usage, imported goods, energy-intensive operations, tight margins or weak cash reserves are usually the most exposed.
What should directors do if costs start rising again?
Update cash flow forecasts, review margins, speak to suppliers, tighten debtor collection and take advice early if the business is already under pressure.
