UK Economy Faces 0.2% Contraction If Strait of Hormuz Remains Closed

A recent report from EY warns that a prolonged closure of the Strait of Hormuz could have severe consequences for the UK economy. If the crucial oil and gas route remains shut until mid-2027, the country's GDP may contract by 0.2% next year.

This would not only slow down growth in 2026 but also lead to a higher inflation rate. EY predicts that energy disruptions could push inflation up to 6.4% by the end of 2026, exceeding the expected peak of 3.5% if normalcy is restored soon.

Rising prices would likely cause consumers to spend less and businesses to delay investments, making it even harder for the UK economy to recover.

However, there is some good news. If the Strait of Hormuz reopens by September 2026, EY estimates that growth could pick up again, reaching 0.8% in 2026 and 1.2% in 2027.