Hormuz Closure Puts UK Economy at Risk of Recession

According to EY's latest UK Economic Outlook, if the Strait of Hormuz remains closed until next spring, the UK economy would shrink by 0.2 per cent in 2027.

In this adverse scenario, inflation would more than double to 6.4 per cent by the end of this year, surpassing its last peak in September 2023 when it was 6.7 per cent.

Under a baseline forecast where the Strait reopens by the end of September, EY predicts that inflation will rise from 2.6 per cent to 3.5 per cent and the economy will grow by 0.9 per cent in 2026 and 1.2 per cent in 2027.

However, if the Strait stays shut until early or mid-2027, growth this year would slow to 0.5 per cent before the economy contracts by 0.2 per cent in 2027.