The United Kingdom could fall into recession if the Strait of Hormuz remains closed into 2027, according to a new forecast from EY, which warns that soaring oil and gas prices would reignite inflation.
EY's latest economic outlook said British GDP could slow to 0.5% this year and contract by 0.2% next year in the event of a prolonged closure of the strategic waterway. The forecaster also cautioned that inflation could rise to 6.4%, well above the Bank of England's 2% target, as energy costs surge through the economy.
The warning underscores how a major disruption in the Middle East could deliver a fresh shock to the UK economy. The Strait of Hormuz sits between Iran and Oman and is one of the world's most critical energy chokepoints, carrying a substantial share of global crude oil and liquefied natural gas shipments.
The EY scenario assumes that the waterway remains shut into 2027, an outcome that would force tankers to take longer alternative routes, tighten supply and drive up energy prices worldwide. The strait has long been considered a potential flashpoint in any broader conflict involving Iran, and the new forecast lays out the economic damage such a disruption could inflict.
For UK households and businesses, the impact would be felt quickly through higher fuel bills, transport costs and a broad range of goods prices. The prospect of resurgent inflation would also complicate the Bank of England's task, potentially delaying further interest rate cuts and squeezing household budgets. Energy price shocks of the kind envisaged in the report would ripple through supply chains, raising costs for manufacturers, retailers and the wider services sector.
The EY report adds to a growing body of economic analysis assessing the potential fallout of a prolonged Iran war. Analysts have repeatedly cautioned that an expanded conflict could push energy markets into turmoil, and the UK, like other advanced economies, remains highly sensitive to energy price movements.
Under the bleakest scenario modelled by EY, the combination of weaker growth and higher inflation would leave the UK economy in a difficult position, with output contracting and living costs rising at the same time. The forecast serves as a reminder that the UK's growth outlook depends not only on domestic policy decisions, but also on the stability of global energy routes.
While the central scenario in EY's forecast remains more benign, the report makes clear that a prolonged closure of the Strait of Hormuz would be among the most severe external shocks facing the British economy. The findings come as ministers and officials continue to weigh the potential economic consequences of a wider Middle East conflict.
