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Iran war risk, Strait of Hormuz outlook to shape UK growth and inflation
EY warns that if Strait of Hormuz disruption persists, UK growth could slow to 0.5% this year and contract 0.2% next year, with inflation potentially reaching 6.4%.
An Iran related escalation could pose a growth and inflation risk for the UK, with the outcome tied to how access through the Strait of Hormuz develops, according to analysis cited by OilPrice.
OilPrice says Big Four consultancy EY revised its baseline view for UK growth, lifting the forecast to 0.9% this year, but emphasized that its baseline depends on the Strait of Hormuz reopening enough to allow around a fifth of global oil and gas supplies, plus critical goods, to leave the Gulf region.
EY analysts cautioned that prolonged energy price disruption may halt growth in 2027. In a scenario where disruption continues into mid 2027, the forecast calls for growth to slow to 0.5% this year and contract by 0.2% next year.
The analysis also pointed to an inflation path that is set to end the year at 3.5%, but under an adverse disruption scenario, inflation could reach 6.4% within months. OilPrice adds that President Trump has hinted a new Iran peace deal may be close, though investors may approach such signals cautiously given past breakdowns of related agreements.