UK Economy Shows Resilience Despite War in Iran Concerns

The UK economy has shown surprising resilience despite concerns that the war in Iran would take an increasing economic toll. The six-month narrative of economic concern due to the ongoing conflict and closure of the Strait of Hormuz has not materialized as expected, with Q2 GDP growing by 0.4% quarter-on-quarter.

This growth was driven by consumer spending and business investment, which are expected to continue strongly into the third quarter. The labour market appears robust, with unemployment holding firm at 4.9%, job vacancies stable, and wage growth picking up in both nominal and real terms.

The UK construction cost outlook has worsened since January 2026, with JLL's Tender Price Index forecast expanding from a single-point estimate of 3.5% to a wider range of 2.8-4.5% for the year due to geopolitical disruption and inflationary pressure across key construction materials and energy inputs.

Investors are actively deploying capital in the UK market, with international buyers maintaining their 46% share of market activity. London office prime rents rose to £190.00 per sq ft in Q2, driven primarily by intensifying supply constraints.