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The UK economy would shrink by 0.2 per cent in 2027 if the Strait of Hormuz remains closed until next spring, with inflation more than doubling to 6.4 per cent by the end of this year, according to EY’s latest UK Economic Outlook.

The forecast sets out two scenarios for the waterway, which normally carries 20 per cent of the world’s oil and gas.

Under EY’s baseline, in which the Strait reopens by the end of September, inflation rises from its current level of 2.6 per cent to 3.5 per cent. The economy grows by 0.9 per cent in 2026 and by 1.2 per cent in 2027, and the Bank of England cuts interest rates twice next year, to 3.25 per cent.

Under the adverse scenario, in which the Strait stays shut until early or mid-2027, meaning it would have been closed for at least a year since the war with Iran began, inflation reaches 6.4 per cent. Growth this year slows to 0.5 per cent before the economy contracts by 0.2 per cent in 2027, including two quarters of negative growth in the first six months.

Inflation was last above that level in September 2023, when it was 6.7 per cent, having peaked at 11.1 per cent the year before. It fell to 2.6 per cent in June, the lowest reading since March 2025.

EY expects unemployment to rise to 5.3 per cent by the end of the year before falling over the following two years.

Peter Arnold, EY’s UK chief economist, said: “The UK economy has proved more resilient than many expected this year.

“Oil prices had started to fall back to pre-conflict levels and, while business and consumer confidence have softened, this decline remains less severe than the shock triggered by the 2022 energy crisis.

“Ongoing disruption to global energy markets will now start to test this economic resilience.

“If the Strait of Hormuz reopens in the coming months, we expect the UK to avoid a more pronounced downturn, but an extended closure into 2027 would raise inflation and could push the economy into contraction next year.”

Donald Trump, the US President, said on Sunday that he had held off on new air strikes against Iran after the “perimeters” of a deal had been agreed, including an immediate reopening of the Strait. Iran has not acknowledged any such agreement.

Escalating tensions recently took oil to $100 (£75) a barrel for the first time since May, with petrol reaching 160p a litre, its highest level since the fighting began in February.

Other forecasters have modelled a prolonged closure. In April, the National Institute of Economic and Social Research said a sustained blockade would take £35 billion out of UK output over two years and push inflation above 4 per cent.

Andy Burnham, who became Prime Minister in July, has made tackling the cost of living a priority for his first weeks in office.

Arnold said the economy was likely to become more concentrated on technology and services as construction continued to suffer.

“Rising project costs, persistent labour shortages and weak productivity growth risk constraining the delivery of major infrastructure projects at a time when demand remains high,” he said.

“Enhancing productivity in the sector will be critical if the UK is to deliver its infrastructure ambitions while supporting broader economic growth.”

EY’s forecasts were published alongside figures from the recruitment site Indeed showing that UK job postings have fallen by 13 per cent since the start of the year. Summer jobs were at their lowest level in four years and graduate roles at their weakest point since the pandemic. Posted wage growth was 3.9 per cent, the lowest annual rate since February 2022.

Indeed said 9.4 per cent of roles, almost one in 10, mentioned AI in the job posting.

Jack Kennedy, of Indeed, said: “The UK’s labour market is under sustained pressure. Hiring demand is falling across most parts of the economy, while posted wage growth is gradually cooling.

“That is particularly challenging for graduates and younger workers, who are competing for fewer opportunities to gain an initial foothold.”

Jamie Young

Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the ‘covid era’ and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine’s coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk

Starbucks announced on Monday that its classic Pumpkin Spice Latte will be returning to store menus later this month.

The popular drink will be joined by new beverages and food items, as well as limited-time merchandise collections.

While the classic Pumpkin Spice Latte returns on Aug. 25, Starbucks will add new pumpkin spice-flavored drinks, including the Iced Pumpkin Cream Shaken Espresso, Pumpkin Spice Chai and Iced Pumpkin Cream Matcha. The Pumpkin Cream Cold Brew, Iced Pumpkin Cream Chai and Pumpkin Spice Frappuccino blended beverage will also return.

STARBUCKS TO CUT 300 US JOBS, CLOSE SOME REGIONAL SUPPORT OFFICES

The Pumpkin Spice Latte is returning to Starbucks’ menu on Aug. 25. (Christina Tkacik/Baltimore Sun/Tribune News Service via Getty Images)

A new iced banana bread-flavored latte and chai drink will join the company’s fall menu, as will the Chaider – a beverage featuring a blend of chai and cider-inspired flavors.

A new Chicken Bacon Protein Pocket and a Hedgehog Cake Pop will also join store menus this fall. The protein pocket is the latest addition to Starbucks’ broader push to expand its protein offerings.

The new Chicken Bacon Protein Pocket contains 20 grams of protein. (Starbucks)

Starbucks is offering new drinkware and a hat as part of its PSL Society collection.

The announcement comes after the company reported third-quarter results last week.

SEATTLE COULD LOSE HUNDREDS OF MILLIONS IN TAX REVENUE AS STARBUCKS EXPANDS IN TENNESSEE

Starbucks raised its annual sales and profit forecasts for the second time, as CEO Brian Niccol’s years-long turnaround efforts reignite demand at the world’s largest coffee chain.

Under Niccol, the company has aimed to improve customer experience through a simplified menu and shortened wait times, fueling four straight quarters of comparable sales growth.

Starbucks CEO Brian Niccol’s turnaround plan is called “Back to Starbucks.” (Michael Reaves/Getty Images)

“We have more work to do,” Niccol said in a statement on Wednesday, while finance chief Cathy Smith said the company is focused on what it can control amid a “dynamic operating environment.”

WHY STARBUCKS PICKED NASHVILLE OVER SEATTLE FOR EXPANSION, ACCORDING TO LOCAL BUSINESS REPORTER

The Seattle-based company forecast global same-store sales growth of near 6%, above its prior forecast of about 5% or above. It expects adjusted earnings per share to be between $2.55 and $2.65, compared with its previous forecast of $2.25 to $2.45.

“Starbucks has begun to experience market share stabilization in recent months, most notably with younger diners,” Consumer Edge analyst Michael Gunther said.

“Consumers may be shifting dining dollars toward in-home eating but are leaving room in the budget for daily drink habits,” he added.

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The “Back to Starbucks” strategy had been squeezing margins, as it involved heavy investments in staffing and store operations, which the company has looked to tackle with cost cuts through layoffs, office consolidation and streamlining its operations.

Reuters contributed to this report.

American consumers are continuing to face elevated beef prices amid an ongoing cattle shortage, which is also hitting the bottom line of major meatpacking companies.

The U.S. cattle herd is at its lowest level in over 70 years due to drought reducing forage areas in key ranching regions, which forced ranchers to liquidate cattle. 

Ranchers are also facing higher operating costs for feed, labor, fuel and equipment, while some live cattle imports have also been constrained due to concerns over diseases affecting livestock.

CATTLE HERD ‘FIX’ IS TAKING YEARS LONGER THAN PREDICTED, CEO WARNS AMID HISTORIC BEEF SHORTAGE

Beef prices have risen 11.8% over the last year and increased 1.2% on a monthly basis in June, according to the most recent consumer price index (CPI) data released by the Bureau of Labor Statistics. Ground beef prices were up 12.4% from a year ago, while beef roasts were up 13.8% and steaks were up 11.4% in that period.

Tyson Foods noted the challenges in its beef business in its earnings call Monday, with CEO Donnie King saying, “Beef hasn’t performed the way we expected, and we’re not pretending otherwise.”

U.S. cattle inventories are at their lowest level in over 70 years. (Angela Piazza/The Dallas Morning News)

He noted the “well-documented challenges of the current cattle cycle” and said that Tyson’s beef segment operated at a loss of $138 million with sales volume down 15.9% and pricing up 12.1% as “constrained supply pushed input costs and pricing higher.”

The Tyson Foods CEO also discussed the recent announcement by the U.S. Department of Agriculture (USDA) that it will resume imports of cattle from Mexico starting in late August for the first time in more than a year.

‘WE GOTTA EAT’: PHILLY BUTCHER ON RISING BEEF PRICES AS CUSTOMERS ADJUST SPENDING HABITS

Tyson Foods reported losses in its beef division, and the price surge caused by supply shortages turned consumers away. (Michael Nagle/Bloomberg via Getty Images)

Cattle imports from Mexico were suspended due to an outbreak of the New World screwworm, which poses a threat to domestic livestock. USDA’s monitoring has noted 44 cases of New World screwworm in the U.S. since June, with cases concentrated in Texas and New Mexico.

The USDA’s resumption of imports will be flexible and will start at the Douglas, Arizona, port of entry after the neighboring Mexican states of Sonora and Chihuahua have been identified as the lowest-risk Mexican states for the New World screwworm.

The agency cited those Mexican states’ “strong, well-established inspection programs” and geographic distance from southern Mexico, where most of the cases have been concentrated.

BEEF PRICES HIT RECORD HIGHS AS NATIONWIDE CATTLE INVENTORY DROPS TO LOWEST LEVEL IN 70 YEARS

King said the “recent announcement of a phased reopening of the Mexican border for the importation of cattle shows potential improvements to long-term cattle availability.”

“Although the reopening won’t have a material impact on the remainder of this fiscal year, which ends in September, it does provide the potential for some level of improvement in 2027 and beyond,” King added. 

“To be clear, the reopening of the Mexican border will not solve the entire gap of beef losses we are currently seeing. We are not waiting passively for the cattle cycle to turn, and we continue to focus on improving the variables within our control.”

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WASHINGTON — President Donald Trump lashed out at ExxonMobil and Chevron on Monday, accusing the two oil giants of making excessive profits from surging crude prices tied to the ongoing conflict with Iran and demanding they lower prices for American consumers.

Speaking to reporters at the White House during an executive order signing, Trump singled out both companies by name over their recently reported second-quarter earnings. “Chevron, too much money. ExxonMobil, too much money,” Trump said, adding that the companies “better cut the retail price, the consumer price” and return some of their profits to the public.

Record profits amid a supply shock

Trump’s comments followed second-quarter earnings reports last week that showed both companies posting sharply higher profits compared with the same period a year earlier. ExxonMobil reported earnings of $14.5 billion for the quarter, roughly double what it earned during the same period last year. Chevron reported $12 billion in quarterly profit, up from $2.5 billion a year earlier, marking a roughly 400% increase and the company’s highest quarterly earnings in at least six years. Combined, the two oil majors posted $26.5 billion in second-quarter earnings.

“They’re making too much money based on a shortage,” Trump said, framing the profits as a direct consequence of the supply disruption caused by the conflict rather than normal market performance. “I don’t like it.”

Oil prices surge as the Strait of Hormuz remains contested

The earnings windfall for both companies has come amid a dramatic run-up in oil prices since the United States and Israel launched coordinated strikes against Iran on Feb. 28. U.S. crude oil prices have climbed roughly 20% since the conflict began, with oil futures averaging around $92 per barrel from April through June, about 27% higher than the first quarter of the year. Iran has retaliated by attempting to choke off oil exports through the Strait of Hormuz, a critical global shipping corridor, triggering what has been described as the largest supply disruption in the region’s history.

Those higher crude prices have translated directly into pain at the pump for American drivers. Gasoline prices averaged about $4.10 per gallon nationwide on Monday, according to AAA data, nearly 40% higher than the $2.98 per gallon drivers paid on Feb. 27, the day before the war began.

Trump pressures companies to share profits

Trump was blunt in his demand that the oil companies pass along relief to consumers, drawing a direct comparison between the scale of their profit growth and what he argued they owed the public in return. “When you look at one company, where they made 12 times what they made the year before, they’re going to give some of that back to the public, and they better cut the retail price, the consumer price,” Trump said.

The president acknowledged the apparent tension between his criticism and his broader economic philosophy, noting his general support for free markets even as he pushed the companies to act. “I should be the last one to say it because I’m a big free enterprise guy,” he said, adding, “Nobody bigger.” Still, he made clear his frustration with the current situation. “I’ll say it loud and clear. I’m not happy about it,” Trump said.

A prediction of falling prices ahead

Despite his criticism of the oil companies’ current profits, Trump expressed optimism that prices would ease significantly once the conflict with Iran concludes, predicting that oil prices would “drop through the floor” when the war ends. His comments came as he separately addressed the state of ongoing negotiations with Iran, describing the current round of talks as Iran’s “last chance” to reach a deal and accusing Iranian leadership of being “unbelievably duplicitous” in recent discussions with Oman over safe navigation routes through the Strait of Hormuz.

Where the profits are going

According to reporting on the companies’ earnings, both ExxonMobil and Chevron directed their windfall profits primarily toward reducing existing debt rather than increasing share buybacks, a detail that stands somewhat apart from the more consumer-focused response Trump has called for. Neither company had issued a public response to Trump’s comments as of Monday, though shares of both companies dipped modestly following his remarks, with Chevron falling nearly 2% and Exxon trading slightly lower.

A politically charged issue

Trump’s public criticism of the oil industry echoes similar rhetoric used by his predecessor, former President Joe Biden, who also targeted oil companies over their profits during periods when inflation was weighing heavily on American consumers. The political stakes tied to gas prices appear significant for Trump as well: a Quinnipiac University poll found that 54% of voters blame the president “a lot” for the recent rise in gasoline costs, a finding that comes as the administration faces broader scrutiny over its handling of both the Iran conflict and its economic fallout ahead of November’s midterm elections.

Market context

Even as Trump criticized the oil companies’ profits, broader oil markets showed signs of easing Monday, with Brent crude, the international benchmark, falling nearly 5% to around $83 per barrel amid growing optimism that a diplomatic resolution to the Iran conflict may be within reach. That decline came the same day the Dow Jones Industrial Average closed at a record high, driven in part by falling oil prices and a broader rally in technology stocks.

With earnings season for the major oil companies now largely behind investors, attention is likely to shift toward whether Exxon and Chevron respond in any way to Trump’s public pressure, and whether ongoing diplomatic talks between the U.S. and Iran over the Strait of Hormuz produce the kind of resolution the president has suggested could send oil prices sharply lower. Until then, American drivers are likely to continue facing elevated prices at the pump, keeping pressure on both the White House and the oil industry as the conflict’s economic fallout continues to unfold.