UK Economy on Brink of Recession if Strait of Hormuz Closure Persists

The UK economy is at risk of recession if the Strait of Hormuz remains closed until early to mid-2027, according to EY. The global consulting firm forecasts that a prolonged disruption would lead to a contraction in GDP growth by 0.2% in 2027, as well as higher inflation rates.

Under its base-case scenario, EY expects the UK economy to grow at 0.8% this year and 1.2% in 2027, assuming the Strait of Hormuz reopens by September. However, if the closure persists into 2027, growth would slow to 0.5%, with a corresponding contraction in GDP.

The Bank of England is also expected to keep interest rates at 3.75% this year before cutting them to 3.25% in April and July 2025, according to EY's forecast.