BRITAIN’S economy could be sent into recession next year if the Strait of Hormuz remains closed into 2027 amid the US and Israel’s prolonged war on Iran, EY has warned.

According to the transnational accountancy firm’s economic outlook, gross domestic product could slow sharply to 0.5 per cent growth this year and contract by 0.2 per cent next year if the vital waterway — through which a fifth of the world’s oil and gas normally passes — stays shut until early or mid-2027. 

It would mean inflation would soar to 6.4 per cent by the end of 2026.

If the strait reopens by the end of the third quarter this year, growth will remain resilient, with the outlook upgraded to 0.9 per cent expansion in 2026 and 1.2 per cent in 2027.

The report also forecasts business investment falling 0.7 per cent in 2026, with household spending remaining subdued as consumers face higher prices and delayed interest rate cuts.

On Saturday, Chancellor John Healy said that he will be watching closely to protect the public from price gouging at the petrol pump and in supermarkets because of the war.

He conceded that “we can’t completely stop the squeeze” but that he would be ready to intervene to protect consumers from unfair price rises.