Emeritus Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm.

UK inflation held at 3% in February, but this is not a sign of things to come. The inflationary landscape has been upended since conflict in the Middle East reignited on the last day of the month.

The crisis is injecting fresh volatility into energy markets. Any sustained increase in oil and gas costs will quickly ripple through the economy, lifting transport, production and household expenses — threatening spiralling inflation.

The impact will be even greater than that caused by Russian’s invasion of Ukraine in 2022. With energy facilities severely damaged and production grinding to a halt across the Middle East, there is now a long-term, structural supply-side issue in the energy market. Even if the war was to stop today, the damage has been done and long-term implications are inevitable.

This is all bad news for the UK economy. The Bank of England said that it is “ready to act” to prevent inflation escalating, meaning interest rates could rise again, dampening economic activity and growth. Government finances, already tight, will be impacted too. With rising energy prices affecting households across the country, the Government will face strong calls to provide financial support for energy bills in the Autumn, providing extra pressure on expenditure. UK bond yields remain at one of their highest levels since 2008, increasing the cost of servicing the debt, and forecasts for economic growth across 2026 have fallen as low as 0.6%.

At the Spring Statement, the economy appeared to be approaching a period of stability, if not yet growing at any great pace. Only weeks later, the road ahead looks considerably bleaker.