Shipping disruptions through the Strait of Hormuz, one of the world’s busiest maritime corridors,  are sending ripple effects far beyond the Middle East, threatening energy markets, freight costs and global supply chains, a United Nations Conference on Trade and Development (UNCTAD) study has warned. 

The report said daily ship transits through the strait, which averaged 129 vessels between February 1 and February 27, have fallen close to a standstill amid ongoing military escalation, while Brent Crude has climbed above $100 a barrel, amplifying concerns over inflationary pressures across multiple sectors.

The agency said the strait handled about 25% of global seaborne oil trade, equivalent to roughly 20 million barrels per day in 2024, including 14 million barrels of crude and condensate and 6 million barrels of petroleum products.

Share of global trade passing through the Strait, based on average flows during the week before the military escalation that began on 28 February was 38% of global crude oil trade, 29% of liquefied petroleum gas, 19% of liquefied natural gas, 19% of refined oil products and 13% of chemicals including fertilizers, making any prolonged disruption a direct threat to energy security and industrial supply chains worldwide.

For regional economies, the disruption risks delaying fuel, industrial raw materials and consumer goods imports while increasing freight rates, bunker fuel costs and marine insurance premiums. Gulf producers and import-dependent neighbouring economies could face rising logistics costs and supply bottlenecks, particularly for petrochemicals and essential commodities routed through the waterway.

UNCTAD said the impact would extend well beyond the region through higher food and fertilizer prices, as natural gas and fertilizer markets remain tightly linked. Countries heavily reliant on fertilizer shipments from the Gulf — especially lower-income agricultural economies — could face reduced access and rising import bills, raising the risk of weaker crop output and higher food inflation.

The report noted that similar supply-chain shocks during the COVID-19 pandemic and the early phase of the Russian invasion of Ukraine quickly spread across interconnected commodity markets, pushing up food and transport costs globally. It warned that the latest disruption comes at a particularly fragile moment for developing economies already burdened by high debt servicing costs, limited fiscal space and weak capacity to absorb fresh price shocks.

UNCTAD said the scale of the economic fallout would depend on how long the disruption lasts and how far tensions spread, but stressed that vulnerable economies dependent on imported energy, fertilizers and staple foods face the greatest exposure. It called for safeguarding maritime transport, ports and civilian shipping routes in line with international law to reduce risks to global trade and development.

Key implications and considerations

* Disruptions in the Strait of Hormuz underscore the vulnerability of critical maritime chokepoints to geopolitical tensions and their potential to transmit shocks across supply chains and commodity markets.

* Reducing risks to global trade and development, including environmental risks, requires de-escalation and safeguarding maritime transport, ports and seafarers, and other civilian infrastructure, while maintaining secure trade corridors in line with international law and freedom of navigation

* Economic impacts, both globally and for the region, will depend on the duration, intensity and geographic scope of the tensions. Continued monitoring is essential to assess evolving risks and their potential impacts.

* Socio-economic implications for developing economies: Many developing countries already face high debt service burdens, limited fiscal space and constrained access to finance. In this context, rising energy, transport and food costs could strain public finances and increase pressure on household budgets, potentially heightening economic and social pressures and complicating progress toward sustainable development, particularly in economies heavily dependent on imported energy, fertilizers and staple foods. - TradeArabia News Service