UK Faces Recession If Strait of Hormuz Stays Closed, Forecaster Warns
EY says UK growth could fall to 0.5% this year and the economy could contract next year if oil and gas flows stay disrupted.
- Britain's economy faces a potential recession if the Strait near Hormuz remains closed into 2027, according to a new economic report. GDP could slow to 0.5% this year and contract by 0.2% next year.
- Continued disruption through mid-2027 would push inflation to 6.4% by late 2026, the report warned, as the Strait functions as a critical global artery for a fifth of the world's oil and gas.
- Last week, the Bank voted to maintain interest rates at 3.75%, signaling readiness to hike if the Iran war persists. Consumer Prices Index inflation was 2.6% in June, expected to peak around 3.2% before easing toward 2%.
- Chancellor John Healey admitted the government 'can't completely stop the squeeze' faced by households and businesses. Business investment will fall 0.7% in 2026, with consumer spending growth limited to 0.3% next year.
- President Trump hinted on Sunday that a new peace deal with Iran was close to agreement, raising hopes for economic recovery. Yet investors remain cautious, citing a prior 60-day ceasefire that quickly collapsed.
16 Articles
16 Articles
How the Iran War Will Determine Britain's Economic Growth
The Iran war could “halt growth” in the UK economy as the success of Andy Burnham and John Healey’s economic management largely hinges on President Trump’s decision-making, a City firm has warned. Big Four consultancy EY has said that the UK economy could perform better than first expected this year as its growth forecast was revised up to 0.9 per cent. But economists at the firm said baseline forecasts hinged on the opening up of the Strait o…
UK recession fears grow if Hormuz remains closed, forecaster warns
Britain's economy may shrink in 2027 if the Strait of Hormuz closure continues. Forecasters predict a 0.2% contraction if the waterway remains shut until mid-2027. This scenario would also increase inflation to 6.4% by the end of 2026. However, reopening the strait by September improves this year's forecast to 0.8%. EY expects interest rates to be cut next year after holding them steady.
Iran war could ‘halt growth’ across UK economy
The Iran war could “halt growth” in the UK economy as the success of Andy Burnham and John Healey’s economic management largely hinges on President Trump’s decision-making, a City firm has warned. Big Four consultancy EY has said that the UK economy could perform better than first expected this year as its growth forecast was revised up to 0.9 per cent. But economists at the firm said baseline forecasts hinged on the opening up of the Strait o…
Evening Standard
Prolonged Iran war could tip UK into recession next year, report warns
The EY economic outlook cautions that GDP could slow to 0.5% this year and contract by 0.2% next year if the Strait of Hormuz remains shut into 2027.
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