UK Economy at Risk of Recession in 2027 Amid Strait of Hormuz Closure

A recent report by EY warns that the UK economy could enter a recession in 2027 if the Strait of Hormuz remains closed into next year due to ongoing Iran war. The waterway is crucial for global oil supplies, carrying about a fifth of the world's oil and gas.

The report states that under this scenario, GDP growth would slow sharply to 0.5% this year and contract by 0.2% in 2027. Inflation could rise to 6.4% by the end of the year due to surging oil and energy prices.

If the Strait reopens by the end of the third quarter, EY's forecast suggests growth will remain fairly resilient. The report upgrades its UK economic outlook to 0.9% expansion this year and maintains its prediction for 1.2% growth in 2027.