Strait of Hormuz Closure Threatens UK Economic Growth

UK economic growth could be pushed into contraction in 2027 if the Strait of Hormuz remains closed, according to EY's latest economic outlook. The Strait of Hormuz is a crucial waterway that carries around one-fifth of the world's oil and gas.

A prolonged closure would send energy prices sharply higher, feeding through to inflation, household bills, and business costs. Under EY's downside scenario, if the waterway remains closed until early or mid-2027, UK economic growth would slow to 0.5 per cent in 2026 before contracting by 0.2 per cent in 2027.

By contrast, EY's central forecast assumes the Strait of Hormuz reopens before the end of the third quarter of 2026. Under that scenario, the firm expects the UK economy to grow by 0.9 per cent in 2026, slightly higher than its previous forecast of 0.8 per cent, before expanding by 1.2 per cent in 2027.

According to EY's chief economist, Peter Arnold, prolonged disruption to global energy markets would test the UK economy's resilience. He added that if the Strait of Hormuz reopens soon, the UK could avoid a deeper downturn, while an extended closure into 2027 would increase inflationary pressures and push the economy into contraction.