UK Could Slip Into Recession if Strait of Hormuz Remains Closed, EY Warns

LONDON: The United Kingdom could enter a recession in 2027 if the Strait of Hormuz remains closed to commercial shipping beyond the middle of next year, according to a warning issued by global accountancy and consulting firm EY. The forecast highlights the growing economic risks posed by prolonged disruption to one of the world’s most vital energy trade routes.

EY has nevertheless slightly upgraded its forecast for Britain’s economic growth in 2026 to 0.8%, up from 0.7%, based on the assumption that the strategic waterway reopens by the end of September. Under that scenario, the UK economy is projected to expand by 1.2% in 2027.

Peter Arnold, EY’s UK Chief Economist, cautioned that an extended closure of the Strait of Hormuz would fuel inflation through higher energy prices, disrupt supply chains, and significantly weaken consumer and business confidence. He said such a scenario could push the British economy into contraction next year.

The Strait of Hormuz is a critical maritime corridor through which a substantial share of the world’s oil and liquefied natural gas supplies pass. Any prolonged interruption to shipping in the region is expected to drive up global energy costs, placing additional pressure on economies heavily dependent on imported fuel, including the United Kingdom.

EY noted that while the UK economy remains resilient under its baseline outlook, continued geopolitical instability in the Middle East represents one of the most significant downside risks to Britain’s economic recovery. The firm said the duration of the disruption in the Strait of Hormuz will be a key factor in determining the UK’s growth and inflation outlook over the coming year.