Nearly one billion people living in the world's most vulnerable economies could face higher living costs, inflation and slower growth as disruptions in the Strait of Hormuz drive up global oil prices, the United Nations Conference on Trade and Development (UNCTAD) has warned.
The UN agency said 983 million people live in 75 vulnerable economies, including least developed countries (LDCs) and small island developing states (SIDS), many of which depend heavily on imported fuel. Of those economies, 65 are net oil importers, leaving them particularly exposed to rising energy costs and supply disruptions.
UNCTAD estimated that a sustained 50% increase in oil prices could add more than $20 billion a year to the collective oil import bill of these economies, forcing governments to balance rising fuel costs against spending on essential services and development priorities.
Strait of Hormuz closure
The warning comes as energy markets react to escalating tensions around the Strait of Hormuz, a critical route for global oil shipments.
According to UNCTAD, crude oil prices have risen by more than 40% and gasoline prices by over 50% since military escalation in the region earlier this year.
"Vulnerable economies are on the front line," the agency said, warning that governments may be forced to choose between paying higher fuel bills and maintaining spending on essential services and development programmes.
The report highlighted that these economies import almost all of their petroleum needs in the form of refined products rather than crude oil. Refined fuels accounted for 97.8% of their net oil imports in 2024, reflecting limited domestic refining capacity.
For some countries, the impact could be particularly severe relative to the size of their economies. Mauritania's oil import bill could rise by the equivalent of 7.3% of gross domestic product, followed by Gambia at 6.3%, Burkina Faso at 5%, Liberia at 4.8%, and Zambia and Lesotho at 4.3% each.
Among island economies, Vanuatu could see its import costs increase by 5.8% of GDP, while the Maldives would face a rise of 5.2%. Tonga, Mauritius and Fiji would also experience significant increases.
Beyond higher prices, some countries face additional risks because of their dependence on oil supplies originating from the Gulf region. Seychelles sources virtually all of its oil imports from countries around the Strait of Hormuz, while Uganda obtains more than 60% of its supplies from the region. Mauritius, Tanzania, Zambia, the Maldives and Mauritania also depend heavily on Hormuz-linked imports.
The Strait of Hormuz is one of the world's most critical energy chokepoints, connecting Gulf oil producers to global markets. Any prolonged disruption could force import-dependent countries to seek alternative suppliers, often at higher cost.
UNCTAD warned that higher energy prices would ripple through economies by raising freight and transport costs, increasing inflation and putting pressure on government finances. Wider current account deficits, weaker currencies and tighter credit conditions could further slow economic growth, particularly in countries with limited fiscal space.
Quoting UN Secretary-General António Guterres, the report said: "When the Strait of Hormuz is strangled, the world's poorest and most vulnerable cannot breathe."
The agency called attention to the disproportionate burden borne by developing economies, arguing that without support, the latest energy shock could deepen existing structural vulnerabilities and undermine progress toward sustainable development goals. - TradeArabia News Service
