UK Economy Bracing for 2027 Recession Due to Ongoing Strait of Hormuz Disruptions

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

The report predicts that inflation could rise to 6.4% by the end of this year, driven by surging oil and energy prices. If the Strait reopens before the end of the third quarter of this year, growth is expected to remain fairly resilient.

In its latest economic outlook, EY upgrades its UK economic forecast to 0.9% expansion this year and maintaining its prediction for 1.2% growth in 2027. The report also sees interest rates remaining at 3.75% for the rest of this year, before being cut twice in April and July next year.