EY warns UK recession risk in 2027 if Hormuz stays closed

Britain's economy faces a significant risk of recession in 2027 if the Strait of Hormuz remains closed to global shipping beyond the middle of next year, according to a new forecast from the accounting firm EY released on Monday, August 3, 2026. The firm warned that a prolonged closure would sharply slow growth this year and lead to an economic contraction next year, fueled by higher inflation from surging energy prices.

EY's baseline forecast, which assumes the vital waterway reopens by the end of September 2026, projects UK economic growth of 0.8 percent this year, accelerating to 1.2 percent in 2027. However, in an adverse scenario where the strait remains shut into early or mid-2027, the firm predicts growth would slow to 0.5 percent in 2026 and the economy would contract by 0.2 percent in 2027. Under this extended closure, inflation could climb to 6.4 percent by the end of 2026, compared to a peak of 3.5 percent if shipping resumes soon.

Peter Arnold, EY UK's chief economist, stated that the duration of the closure is a critical factor. He said a reopening in the coming months would likely help the UK avoid a deeper downturn, while an extended shutdown would raise inflation...