NatWest faces £140m hit from Iran war as UK growth slows and inflation rises

NatWest reported first-quarter profits exceeding expectations at £2 billion, a 12% increase year-on-year. However, the bank anticipates a £140 million hit due to the economic fallout from the Middle East conflict, contributing to a £283 million impairment charge. This geopolitical risk, coupled with rising inflation and a downgraded UK GDP growth forecast of 0.4% for the year, has led NatWest to revise its economic outlook. The bank expects unemployment to reach 5.5% and inflation to hit 3.5%, while forecasting no base interest rate hikes by the Bank of England this year. Despite these challenges, NatWest expects its income for the year to be at the higher end of previous guidance.

Asia-Pacific economies are expected to experience a slowdown in growth this year due to rising costs linked to the US-Israel war on Iran and lingering trade uncertainty. The International Monetary Fund (IMF) forecasts that emerging and developing Asia will grow at 4.9 per cent, down from 5.5 per cent in 2023. China's economy is also expected to ease, despite posting better-than-expected growth of 5 per cent in the first quarter. The IMF attributes this slowdown to a series of shocks, including the ongoing military conflict in the Middle East. The predictions come as global trade flows are threatened by tariffs and supply chain disruptions. This forecast marks a significant downgrade from previous projections.