UK Economy at Risk of Contraction If Strait of Hormuz Closure Persists

UK economic growth could stall if the Strait of Hormuz remains closed past mid-2027, warns EY's economics team. The firm has trimmed its 2026 UK growth forecast to 0.8% from 0.9%, assuming the strait reopens by September.

Under this scenario, EY projects 1.2% growth in 2027. However, if the closure drags into next year, inflation would accelerate and the UK economy could contract by 0.2% in 2027, with inflation rising to 6.4% by the end of 2026.

EY's chief economist for the UK, Peter Arnold, noted that 'if the Strait of Hormuz reopens within a few months, a more severe slowdown can likely be avoided.'