Tensions in the Middle East have always carried global implications, but few pressure points are more critical than the Strait of Hormuz. This narrow passage off the coast of Iran is the transit route for around one-fifth of the world’s oil and a quarter of its liquefied natural gas (LNG). A closure, even temporary, would trigger a global economic ripple. For the UK, the consequences would be serious, with sharp effects on energy costs, inflation, and supply chains.
The likely impact on the UK economy
Although the UK does not buy a large share of oil or gas directly from the Gulf, global energy markets are extremely sensitive. A disruption in supply from the region would cause oil and gas prices to surge on international markets. That would feed through to UK fuel prices, electricity generation costs, and ultimately to the cost of goods and services.
Households would feel the pinch at the petrol pump and through higher heating bills. Businesses would face increased production and transport costs. Sectors such as food, manufacturing, and logistics, all of which rely on energy-intensive processes or imported inputs, could see margins squeezed or operations disrupted.
With inflation already proving stubborn, a sudden energy price shock could reverse recent progress and prompt the Bank of England to hold or even increase interest rates. That would add to borrowing costs, slow consumer spending, and potentially delay investment decisions by UK firms.
How UK businesses can respond now
While the exact course of events cannot be predicted, businesses can take practical steps now to reduce their exposure to external shocks like this one.
- Review and diversify supply chains
Look for alternatives to suppliers or routes that may be affected by increased shipping costs or delays. Building in more resilience can help ensure continuity. - Lock in energy contracts
Businesses should explore fixed-price energy contracts or forward purchasing arrangements where possible. This can cap exposure to sudden cost spikes. - Build working capital reserves
Improving cash flow and keeping a buffer in reserve will help businesses weather a temporary period of higher costs or slower trading. - Increase pricing flexibility
Firms should assess where modest price rises might be accepted by customers if energy-related costs go up and have plans ready. - Monitor geopolitical and market signals
Keeping informed of developments in the region and commodity markets allows for quicker reactions and better-informed decisions.
Conclusion
The UK may not be on the frontline of Middle Eastern tensions, but it is firmly within the economic blast radius of any disruption to global energy flows. With risks like a Strait of Hormuz closure hard to predict but potentially severe, sensible preparation is not alarmist, it is strategic. Businesses that plan ahead are more likely to stay resilient, competitive, and in control, whatever the headlines bring.