UK inflation could end the year higher than previously expected at 3% because of the US-Israel war in Iran, the government\u2019s economics watchdog has warned.<\/p>\n
David Miles, a senior figure at the Office for Budget Responsibility<\/a> (OBR), said inflation could end the year close to 3% \u2013 a percentage point higher than expected before the war \u2013 because of the energy price shock triggered by the crisis in the Middle East. The UK\u2019s official inflation target is 2%.<\/p>\n Oil prices fell on Tuesday<\/a> after rising above $100 (\u00a375)<\/a> a barrel<\/a> on Sunday, but remain significantly above the level before the US and Israel began bombing Iran just under a fortnight ago. A barrel of Brent crude was trading at $89 on Tuesday afternoon.<\/p>\n Miles told the Commons Treasury committee that if current energy prices were sustained, the UK would face a \u201cmaterial, significant\u201d increase in inflation, delivering a \u201cnoticeable\u201d and \u201cunwelcome\u201d increase in living costs for British households.<\/p>\n On Tuesday the oil price was nearly a fifth higher than before the military action began, while gas prices are up by more than 50%.<\/p>\n \u201cIf there is no change in the picture on the prices from now on, forward, we estimate something like 1% higher consumer prices by the end of the year.<\/p>\n \u201cThat\u2019s orders of magnitude as of right now. I\u2019d have given you a different answer probably yesterday morning, and by the end of this week, it could look different again. It\u2019s not clear which way we go from here.\u201d<\/p>\n