Despite heightened geopolitical uncertainty and elevated financing costs, repriced valuations and resilient occupier markets continue to create compelling long-term opportunities in UK real estate.
Economic backdrop
Shifting outlook
The Middle East conflict continues to weigh on the UK macroeconomic outlook, primarily through its effect on energy prices, inflation expectations, and economic confidence. Although the initial ceasefire raised hopes that disruption would prove short-lived, renewed attacks on commercial shipping through the Strait of Hormuz and subsequent US military retaliation have highlighted the fragility of the situation.
While oil and gas prices have eased from recent peaks, geopolitical risks remain elevated and continue to represent a material source of uncertainty for both the global economy and UK financial markets.
Resilience despite ongoing headwinds
Despite these headwinds, the UK economy has proved more resilient than forecasters had anticipated. GDP expanded by 0.3% month-on-month in March, the first full month following the outbreak of the conflict, contributing to a stronger-than-expected 0.6% quarter-on-quarter expansion in the first quarter of 2026. Activity subsequently softened in April, reflecting weaker domestic demand and the drag from elevated uncertainty.
Even so, the stronger first-quarter performance prompted Consensus Economics to revise its 2026 UK GDP growth forecast upwards to 0.9% in June and July, from 0.6% in April.
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