EY forecasts UK recession risk and 6.4 percent inflation if Strait of Hormuz stays closed into 2027
EY forecasters say the UK economy could shrink 0.2% in 2027 and inflation could reach 6.4% by late 2026 if the Strait of Hormuz, closed by Iran since early March, stays shut into next year. The strait normally carries roughly a fifth of global oil and LNG trade.
Accountancy firm EY is warning that the UK economy could tip into recession if the Strait of Hormuz, the world's most important oil and gas chokepoint, does not reopen to shipping soon. Iran closed the strait in early March, and it normally carries roughly a fifth of global oil and LNG trade. In EY's adverse scenario, if the strait stays shut until early or mid-2027, UK growth this year slows to 0.5%, the economy contracts 0.2% in 2027, and inflation could climb to 6.4% by the end of 2026 as energy prices surge. EY's current baseline is less severe: it assumes the strait reopens by the end of September, which would put growth at 0.8% this year and 1.2% in 2027. The forecast shows how a closure thousands of miles from London is now showing up directly in projections for British households' cost of living and the wider UK economy, five months after Iran first shut the waterway.