UK Economy Faces Recession Threat Over Strait of Hormuz Closure

The UK economy is facing a heightened risk of recession if the Strait of Hormuz remains closed until early or mid-2027. According to EY's economic outlook, this adverse scenario could lead to a GDP growth rate of just 0.5% for this year and contraction by 0.2% next year.

The report also warns that inflation could soar to 6.4% by the end of 2026 due to surging oil and energy prices. However, if the Strait reopens by the end of the third quarter of this year, EY's base case forecast suggests growth will remain fairly resilient, with a predicted GDP expansion of 0.9% in 2026.

Peter Arnold, EY UK chief economist, notes that 'the UK economy has proved more resilient than many expected this year', but cautions that ongoing disruption to global energy markets will test economic resilience.