What will the Iran war do to your household income?

When oil prices go up, we all feel the effects in the form of higher energy bills, fuel costs and prices in the shops.

So while the ceasefire in the US-Israel war with Iran is currently holding - just about anyway - the situation remains extremely volatile and oil remains above $100 a barrel.

And that means cost-of-living pressures haven’t gone away.

In fact, the Resolution Foundation estimates that the typical working-age household will be about £480 worse off this year than they would have been if the war hadn’t happened.

Before the conflict, incomes were forecast to grow by 0.9%, but this new estimate works out to a 0.6% fall.

And for the poorest fifth of households, income growth is now expected to be just 1.2% this year - down from an earlier forecast of 2.8%.

So the war is clearly pushing household incomes in the wrong direction, despite some lower-income households receiving a real-terms increase in their benefits.

Better news for larger families

Thankfully, the end of the two-child benefit cap is set to make a positive difference to some households.

Estimates suggest that the removal of the limit will help increase the incomes of families with three or more children by 7.7%.

By contrast, poorer families with less than three children will see little or no income growth.

Call for extra support with energy bills

Even more affluent households will feel the effects of rising energy and fuel costs and everyday goods getting more expensive.

So the Resolution Foundation is now urging the government to act quickly to make sure households most at risk get the support they need.

One option being discussed is a social tariff for energy, which would offer targeted help to those who are struggling the most, such as those on low incomes or with higher energy needs.

The government has been urged to draw up a plan ahead of winter, when “energy costs will hit hardest”.

“Despite hopes for a sustained peace, the path of this conflict remains uncertain and energy prices remain well above pre-war levels,” said James Smith, chief economist at the Resolution Foundation.

Possible energy support scheme won’t be universal

If any relief scheme is introduced, it’s unlikely to be available to everyone.

Speaking to the BBC earlier this month, chancellor Rachel Reeves said the government is looking at ways to “support people based on their household income”.

However, she stated that it’s currently “too early” to say exactly who would get help.

"I want to learn the lessons of the past because when Russia invaded Ukraine," Reeves commented.

“The richest, the best-off third of households, got more than a third of the support. 

“That makes no sense at all."

Try our household bills calculator

If you’re worried about how rising costs could affect your finances, it could be worth trying our free and interactive household bills calculator.

It only takes a few minutes to use and shows how bills may change based on where you live.

Once you’ve done this, try our free budget planner to map out your monthly finances. 

And if you’re struggling to keep up with household bills, remember that you might be entitled to some support.

Use our benefits calculator to find out what benefits you’re eligible to claim.