Three layers of exposure facing UK healthcare and life sciences

For UK healthcare and life sciences, the Iran conflict is primarily a macroeconomic and supply chain shock. Unlike most sectors, healthcare generally does not face a collapse in patient volumes when consumer confidence falls – people still need medicines, diagnostic scans and treatment. However, the sector is acutely exposed across three distinct supply-side pressure points, each operating on a different timeline:

Direct energy costs: hospitals, pharmaceutical manufacturers, medical device producers and logistics operators all face cost increases from higher oil, gas and electricity prices. The timing varies by contract type – those on variable-rate arrangements or with diesel-dependent operations are already exposed, while those on fixed contracts will feel the full impact as they reset over the next six to twelve months.

Raw material cost and availability: commodities including helium, aluminium and propylene – used across blister packaging, medical device components and pharmaceutical manufacturing processes – are simultaneously more expensive and, in some cases, physically unavailable due to infrastructure damage in the region.

API and generic medicine supply restriction: India is the world's largest supplier of generic medicines and accounts for the majority of WHO-prequalified APIs, making it the single most important source of affordable medicines for health systems including the NHS. The disruption to Gulf air hubs and shipping through the Strait of Hormuz matters directly here: a significant proportion of Indian pharmaceutical exports reach European markets via Middle Eastern transit hubs, meaning the effective closure of those routes forces rerouting that adds cost, transit time and quality risk for temperature-sensitive medicines where cold chain integrity is non-negotiable.

Beyond the immediate logistics disruption sits a more structural concern: with India's own oil supply under pressure, there is a credible risk that it – as it did during COVID-19 – moves to prioritise domestic supply over exports. The UK, as a net importer of APIs and generics with limited domestic manufacturing capacity, sits at the exposed end of that chain.

The critical point is that the disruption will outlast the conflict itself. Even if hostilities end immediately, the backlog in shipping and air freight built up over weeks of disruption will take months to clear – and where physical infrastructure has been damaged, recovery will take considerably longer. Supply chains do not normalise at the speed markets move.

Sector-by-sector implications of the Iran conflict

Financial pressures, energy costs and medicine shortages

The NHS enters this crisis under significant financial strain. NHS providers reported a net deficit of £553m in 2024–25. The 2025 Spending Review committed £29bn in additional annual NHS funding by 2028–29, but those plans were built on an OBR assumption made at the end of January that projected CPI inflation would fall towards 2% through the year. The conflict is expected to prevent that fall (UK CPI inflation rose to 3.3% in March 2026) and the true cost of energy and supply chain inflation to the NHS in 2026–27 has yet to be formally modelled by either the OBR or NHS England.

The most immediate risk, however, is not financial but operational. While most medicines and consumables are held centrally and locally for a matter of weeks, some products with short shelf lives may be subject to critical shortages within days if supply chain disruption persists. The vulnerability is sharpest for products that cannot be stockpiled. For example, radioactive isotopes used in nuclear medicine have extremely short shelf lives, meaning any sustained disruption to imported supply translates directly and rapidly into cancelled diagnostic procedures.

Energy is a material cost line for NHS trusts. Most trusts procure energy through the CCS NHS Energy Basket, a forward-purchasing model that provides partial short-term insulation – but as pre-war hedges roll off through the remainder of 2026 and into 2027, the war-elevated wholesale price becomes the new contract baseline. This could generate significant, unbudgeted pressures across the system.

Unlike medicine costs, energy costs are at least partially forecastable – trusts know when their hedges expire and can plan accordingly. However, generic medicines may present a more difficult problem. With no equivalent hedging mechanism, pressures on medicine costs may prove more structurally persistent for the NHS than the energy shock, and considerably harder to plan around.

Capital programmes are also at risk. When NHS trusts face unexpected revenue pressures, they often respond by underspending capital budgets and redirecting cash to keep services running. A continuing energy crisis in 2026–27 could accelerate that dynamic, prompting the NHS to delay maintenance and equipment replacement just when it needs to invest to deliver the productivity gains its financial plans depend on. Boards and finance directors should be monitoring their capital positions closely and making active decisions about priorities.

Navigating a multi-layered disruption

The UK's life sciences sector was already navigating a challenging operational and investment landscape before the Iran conflict began, and now faces complex and multi-layered disruption.

On the manufacturing side, producers are exposed to the same lack of energy as both production input and petrochemical feedstock that characterised the post-Ukraine energy shock of 2022. This time, however, those challenges come with the added problem of a lack of physical supplies caused by irreversible damage to infrastructure. For example, Iran's March attack on Qatar's Ras Laffan facility took approximately one-third of global helium production offline. Unlike the geopolitical constraints of 2022, this is not a supply problem that resolves when hostilities end. The consequences extend beyond industry: helium's primary end use is in MRI machines, meaning sustained supply disruption carries direct implications for medical imaging capacity worldwide.

For medical devices more broadly, just-in-time procurement models become a liability when shipping reliability collapses and freight costs surge. Implantable devices and diagnostic equipment are manufactured in limited global facilities with long lead times and little substitution flexibility. The helium situation starkly illustrates the problem: with the Ras Laffan facility offline, MRI helium supplies have tightened significantly, with prolonged constraints likely to drive both price increases for new machines and maintenance cost inflation for the existing estate.

Early warning signs of broader supply chain stress are also emerging in the pharmacy sector. Price concessions – the mechanisms by which the NHS acknowledges that market prices for generic medicines have outrun reimbursement rates – are a sensitive early indicator of stress in the medicines supply chain. In March 2026, 201 concessions were granted, a figure 112% higher than the same month the previous year. Pre-existing fragility in global generic drug supply chains is also a factor. However, the scale and trajectory of the increase are consistent with a market beginning to price in the disruption to Gulf shipping routes and petroleum-based raw material costs that the conflict has caused.

Clinical trials are also exposed. The disruption to Gulf air freight hubs affects the movement of trial materials – investigational medicinal products, biological samples, specialist equipment – that routinely travel through the region regardless of where the trial itself is being conducted. For temperature-sensitive biologics and advanced therapy medicinal products, where cold chain integrity is non-negotiable, rerouting adds both cost and quality risk. Delays to a single shipment can pause recruitment, compromise data integrity or, in the most serious cases, invalidate work that has taken years and significant investment to progress.

Rising costs and demand uncertainty

Private healthcare operators face a different combination of pressures as a result of the conflict. On the cost side, energy and supply chain inflation are real and, in some cases, immediate. On the revenue side, consumer confidence is deteriorating, with consumers increasingly uncertain about both the economic outlook and their own finances. For operators whose revenue depends on patients choosing to pay rather than wait for the NHS, that erosion of confidence is a direct threat to volume. Providers for whom the NHS is a key customer may face fiercer negotiations in light of the financial stress that the service faces.

For private hospital operators, the picture is more nuanced. NHS waiting lists are likely to lengthen if the health service defers elective activity under financial pressure – potentially generating demand for private provision. But that uplift can only be captured by operators with the working capital, staffing and supply chain resilience to absorb it. The operators best placed to benefit will be those that have invested in energy efficiency, diversified their procurement and maintained strong balance sheets through the preceding period. Those who have not face the prospect of rising costs at precisely the moment they need to invest to take advantage of increased demand.

What is the macroeconomic impact on the UK?

The conflict has landed on an economy that is structurally exposed to exactly this type of shock. As a net energy importer heavily dependent on gas, the UK is particularly sensitive to global energy price spikes. Instead of the previously forecast drop towards 2%, UK CPI inflation rose to 3.3% in March 2026, with fuel making the largest upward contribution to the monthly change. The Bank of England, which had been expected to cut rates this spring, has held firm; the path of rates through the rest of 2026 remains highly uncertain and depends heavily on how the conflict in the Middle East unfolds. For the NHS, which built its 2026–27 financial plans on an assumption of declining inflation, and for life sciences businesses weighing capital allocation decisions, this is a materially different environment to the one that existed six weeks ago.

Fiscal headroom has likely narrowed significantly. The OBR's March 2026 forecasts were built on economic assumptions locked in at the end of January – weeks before the conflict began – and model none of its consequences. At current energy price levels, the Chancellor has probably lost a significant portion of her fiscal headroom, and the position will worsen if the disruption extends through the second half of 2026. This restricts the government's capacity to provide additional financial support to the NHS or industry.

What's next for UK healthcare and life sciences

The Iran conflict has created a distinct and multi-layered set of pressures for UK healthcare and life sciences – combining an energy price shock, physical infrastructure damage and pharmaceutical supply chain disruption simultaneously. Even if the conflict ends soon, the lag effects – on supply chains, energy markets, inflation and fiscal headroom – will continue to be felt throughout 2026 and into 2027.

Three near-term priorities stand out:

Financial scenario planning: NHS trust boards, ICB finance committees, pharmaceutical company CFOs and private healthcare operators should all be stress-testing their financial positions against, at a minimum, a moderate and a severe scenario for energy and input cost trajectories. The OBR has not modelled any of this – the assumptions underpinning most 2026–27 financial plans are already out of date.

Supply chain triage: organisations should be auditing their exposure to the specific commodities and logistics routes most affected – helium, aluminium, petrochemical-derived APIs, air freight through Gulf hubs – and activating contingency sourcing or buffer stock strategies where practical.

Investment in resilience: the crisis has brought into sharp focus the UK's structural dependency on globally routed pharmaceutical supply chains and imported medical commodities. For individual organisations, the immediate priority is building operational buffers – dual sourcing, strategic stockpiling of critical medicines and reducing reliance on single logistics corridors. Organisations that use this period to assess and address their structural vulnerabilities will be better positioned for the next disruption – whenever and wherever it originates.

The assumptions underpinning most organisations' 2026-27 financial plans were built before this conflict began. RSM's healthcare and life sciences team is working with NHS trusts, life sciences businesses and private healthcare operators to stress-test those plans and identify where exposure is greatest. To discuss what this means for your organisation, contact Max Stanyard or your usual RSM contact.

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