EY warns UK growth hinges on Hormuz as energy shocks loom

What's happened

EY has warned the UK economy could slip into recession if Hormuz remains closed, while a reopening could keep growth resilient at 0.9% in 2026 and 1.2% in 2027. The outlook shifts with oil prices easing and talks of a potential AstraZeneca–BMS merger, set against a backdrop of manufacturing activity data and a stretched timetable for a takeover.

What's behind the headline?

Key takeaways

• EY’s base case sees the UK economy expanding modestly if Hormuz reopens by Q3 2026; extended closure into 2027 would push inflation and risk contraction.
• Inflation is forecast to peak near 3.2% later this year, with rate cuts pencilled in for 2027 depending on energy stability.
• Corporate dynamics, including AstraZeneca–BMS talks, add a layer of market optimism but depend on external energy conditions.

What this means for readers

• Energy volatility remains a central driver of prices and consumer behaviour.
• Policy levers, from monetary policy to energy diplomacy, will shape the pace of recovery.
• Businesses will weigh investment against inflation risks and funding conditions.

How we got here

The EY outlook frames risk from the Strait of Hormuz disruption to oil markets, with UK growth contingent on reopening by late 2026. The analysis follows Bank of England signals and recent activity in European and US manufacturing, alongside market moves and corporate tie-ups that influence the energy and pharmaceutical sectors.

Our analysis

The Guardian reports EY’s UK outlook highlighting Hormuz disruption and a potential AstraZeneca–BMS merger; Independent adds detail on EY’s 2026 growth upgrade and inflation trajectory, referencing BoE signals and 2027 projections.

Go deeper

• How is your household budgeting being affected by potential energy price shocks?
• What sectors do you expect to benefit most if Hormuz reopens soon?
• Are you following AstraZeneca–BMS discussions and what could that mean for stocks?

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