EY Warns UK Faces 2027 Recession Over Hormuz Closure

The United Kingdom faces a potential recession in 2027 if conflict in the Middle East continues to block the Strait of Hormuz. According to an economic outlook report from Ernst & Young, an extended closure of the waterway—which carries one-fifth of global oil and gas—could cause the UK's GDP to contract by 0.2% next year and drive inflation up to 6.4% by the end of 2026.

EY UK chief economist Peter Arnold noted that while the economy has shown resilience, ongoing disruptions to global energy markets are beginning to test that stability. The firm upgraded its 2026 expansion forecast to 0.9% on the condition that the strait reopens by the end of the third quarter of this year. Under current projections, business investment is expected to fall by 0.7% in 2026, while household spending remains subdued.

The Bank of England recently maintained interest rates at 3.75%. However, the central bank indicated it is prepared to hike rates if the war in Iran continues to push inflation higher.