How the Iran War Will Determine Britain's Economic Growth
Consultancy firm EY warns that ongoing geopolitical tensions between the US and Iran could threaten UK economic growth by disrupting energy supplies. While the UK economy has performed better than expected, prolonged instability in the Strait of Hormuz could lead to higher inflation and a potential contraction by 2027.
Why it matters
Energy price volatility remains a critical risk factor for global economic stability and national fiscal policy.
The Iran war could "halt growth" in the UK economy as the success of Andy Burnham and John Healey's economic management largely hinges on President Trump's decision-making, a City firm has warned. Big Four consultancy EY has said that the UK economy could perform better than first expected this year as its growth forecast was revised up to 0.9 per cent. But economists at the firm said baseline forecasts hinged on the opening up of the Strait of Hormuz, allowing around a fifth of global oil and gas supplies as well as critical goods to leave the Gulf region. EY analysts said "prolonged energy price disruption may halt growth in 2027". A separate forecast for a scenario where disruption continues into the middle of 2027 showed growth would slow to 0.5 per cent this year and contract by 0.2 per cent next year.
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