Hormuz Disruption Threatens UK Economy with Contraction and Soaring Inflation

Britain's economy may face significant challenges if the Strait of Hormuz remains closed to shipping until mid-2027. According to accounting firm EY, this could lead to a contraction in GDP growth by 0.2% in 2027, down from an expected 1.2%. The Strait is a crucial energy transit route, and its closure has already led to increased global oil prices.

EY's base-case scenario assumes the Strait reopens by September this year, resulting in a 0.8% economic growth rate for 2026 and 1.2% in 2027. However, if the closure persists until mid-2027, the economy would slow to 0.5% growth this year and contract by 0.2% next year.

The forecasts also predict that inflationary pressures will intensify sharply under a prolonged closure scenario. Consumer price inflation could climb to 6.4% by the end of 2026 if shipping disruptions persist, compared with a peak of 3.5% this year if the Strait reopens within the next few months.