UK new car market posts strong March, but Middle East turmoil clouds outlook

* March UK new sales up 6.6% marking best month since 2019

* EV interest rises on fuel price uncertainty, but market share lags 2026 target

* BYD's UK registrations surged 134% in March, outpacing Tesla's 20% rise, SMMT reports

April 7 (Reuters) - Britain's market for new cars posted its strongest March since 2019, but the outlook looks cloudy as most of the sales reflected orders placed before the Iran war began and mask growing concern about consumer confidence and affordability.

Total car registrations rose 6.6% year-on-year to 380,627 units in March, the Society of Motor Manufacturers and Traders (SMMT) said.

"The headlines belie the costs incurred and the challenges involved," SMMT Chief Mike Hawes said in a statement, adding that much of March's performance would be from orders placed before the start of the Iran war on February 28. March is typically the busiest month of the year and new car registrations were boosted by strong demand from private buyers, SMMT said. Monthly new car sales in Britain have seen an increase year-on-year since December.

However, the escalating conflict in the Middle East involving U.S.-Israeli strikes on Iran and Iranian strikes against Israel, U.S. bases and Gulf states and the closure of the Strait of Hormuz has raised oil prices and darkened the outlook for global economies.

"We expect the good run of form in the car registrations data will grind to a halt in the coming months, as the weight of surging energy costs and the prospect of (rate) hikes from the (BOE) MPC curbs affordability," said Elliott Jordan-Doak, a senior economist at Pantheon Macroeconomics.

IRAN CRISIS MAY SPARK INTEREST IN EVS The SMMT said that the Middle East conflict and the surge in fuel costs may lead to increased demand for electric vehicles, but also risks pushing up energy and supply chain costs.

"With uncertainty around the cost of fuel, electric vehicle enquiries are on the up, as consumers look to electric as an attractive alternative to petrol and diesel vehicles," said Jamie Hamilton, automotive partner and head of electric vehicles at Deloitte. Battery electric vehicles recorded their best month in terms of volumes in March, though their overall market share remained at 22.6%, well below the government-mandated target of 33% for 2026, the SMMT said.

Tesla's UK new registrations rose 20% from a year earlier to 8,599 units, trailing Chinese peer BYD's nearly 134% jump to 15,162 units, according to SMMT data.

Data on Tuesday from New AutoMotive showed similar trends for the month. (Reporting by Ankita Bora, Prerna Bedi in Bengaluru; Writing by Yadarisa Shabong; Editing by Jonathan Ananda, Harikrishnan Nair and Emelia Sithole-Matarise)