The Institute for Fiscal Studies warns the Iran war poses significant risks. The risks affect government spending plans before the budget later this month.

The institute says UK Chancellor John Healey may need £35 billion more. This applies if he protects services and raises defence spending.

The money could come through tax rises or benefit cuts. This is a possible need, not a certain shortfall.

The Iran war is pushing inflation above levels expected in spring. Higher inflation means department budgets buy less.

Protecting service budgets could need about £25 billion more by 2030–31. Raising defence to 3% of the economy could cost another £11 billion.

Both figures are for 2030–31. Healey could instead keep the spending totals he was given.

He would then have to accept cuts to some services. Or he could scale back defence plans. The institute says he must share realistic spending plans for the budget.