UK Economy Braces for 2027 Recession Threat from Iran War

The UK economy is facing a stark warning of potential recession in 2027 due to ongoing disruption in global energy markets.

A report by EY warns that if the Strait of Hormuz remains closed until early or mid-2027, GDP could contract by 0.2% next year and inflation could shoot up to 6.4% by the end of this year.

This scenario is linked to a prolonged Iran war, which would disrupt oil supplies through the vital waterway.

If the Strait reopens by the end of the third quarter, EY's forecast suggests growth will remain fairly resilient, with 0.9% expansion in 2026 and 1.2% growth in 2027.