UK outlook warns Hormuz closure could hit 2027 GDP

The UK’s medium-term economic outlook is at risk of turning markedly weaker if the Strait of Hormuz remains closed to global shipping through mid-2027, according to projections outlined in the latest scenario modelling.

Under that disruption case, UK GDP is projected to contract by 0.2% next year after growth is expected to slow to 0.5% in the current period. The scenario is explicitly tied to the assumption that the strait stays inaccessible until mid-2027.

Strait of Hormuz assumptions drive the shock scenario

The scenario centres on the Strait of Hormuz because it is described as a major conduit for energy trade, facilitating about 20% of global oil and gas transit. A sustained interruption is presented as a channel for renewed volatility in energy markets.

Alongside the growth hit, the projections flag ongoing inflationary pressures as a key vulnerability. The same modelling notes that instability in energy markets could complicate efforts to sustain a stable growth path.

Reopening by end of Q3 supports a stronger growth path The alternative case outlined in the projections assumes the strait reopens by the end of the third quarter. Under that outcome, the outlook is described as more resilient, with growth estimates of 0.9% in 2026 and 1.2% in 2027.

These figures are presented as a contrast to the prolonged-closure scenario, underscoring how sensitive the growth profile is to disruptions affecting energy flows and transport routes.

Near-term forecasts edge higher amid “unexpected stability”

For the current year, the projections have been marginally upgraded from 0.8% to 0.9%. The update is attributed to what the modelling describes as unexpected economic stability.

Even with that small improvement, the outlook is not framed as secure. The same material points to persistent inflationary pressures and energy market volatility as prominent risks that could still alter the trajectory.

Construction constraints add domestic pressure points

Beyond external energy risks, domestic structural challenges are highlighted as complicating factors, with particular attention to construction. Rising project costs, labour shortages, and stagnant productivity growth are cited as obstacles that could slow the delivery of critical infrastructure.

The projections indicate that maintaining economic performance may depend increasingly on technology and high-value business services to offset constraints in more capacity-limited parts of the economy. How effectively those sectors can compensate, and whether energy-related volatility persists, remain key uncertainties embedded in the outlook.