How Strait Of Hormuz Crisis Is Reshaping The Global Economy – Analysis
The Islamic Revolutionary Guard Corps (IRGC) prepares to seize the Epaminondas ship in the Strait of Hormuz. Photo Credit: Tasnim News Agency
By Zaid M. Belbagi
For decades, the global economy has operated on the assumption that oil will always flow, tankers will move across the seas, prices will fluctuate within predictable limits and the arteries of international trade will continue to support the functioning of the world. The 2026 conflict in Iran has fundamentally challenged this assumption.
The situation now constitutes the most severe stress test the entire global energy supply system has ever known. At the center of this challenge is the Strait of Hormuz, the waterway that is only 39 km wide at its narrowest point yet through which approximately 20 million barrels of oil and liquefied natural gas usually pass every day. This passage accounts for between 20 percent and 25 percent of all global energy trade. The current crisis is more than geopolitical, as it carries profound economic consequences with implications that extend across the entire world.
The geography of the Strait of Hormuz is the first point of vulnerability. Iran understands that it does not need to match the US in terms of conventional military power to pose a serious threat. Instead, it relies on other tactics, such as placing sea mines in narrow shipping lanes — a strategy designed to block or slow access and make passage dangerous and costly. Large commercial tankers, which are slow and difficult to defend, are particularly exposed to these threats.
The gap between the military capabilities in the region and the vulnerability of the ships carrying the world’s energy is striking and Iran has long understood how to exploit it. In this conflict, control over the strait is the most effective instrument of influence.
Once the strait was effectively closed, the market reacted immediately and the response was severe. Brent crude surged past $120 a barrel within weeks, reaching levels not seen since Russia’s invasion of Ukraine in 2022. There is, however, an important distinction. Unlike previous disruptions caused by a supplier exiting the market, the 2026 crisis involves a strategic chokepoint effectively going dark. This is structurally different and, in many ways, far more difficult to compensate for.
OPEC’s position shifted almost overnight. The organization that spent much of 2025 managing a surplus and curbing output to prevent a price collapse now faces a shortfall it cannot fully fill. Alternative pipelines, such as the East-West Pipeline in Saudi Arabia and the Abu Dhabi Crude Oil Pipeline, have absorbed what they can and production increases from major non-Gulf producers have begun. Still, these measures offset only about half of the lost supply. Nearly 130 million barrels of crude are now stuck in floating storage in the Gulf, loaded onto tankers that cannot deliver, while Washington and Tehran remain far from reaching any agreement.
Energy shocks of this magnitude do not remain confined to oil markets. They ripple outward through fertilizer, freight and food. About a third of global fertilizer trade passes through the Strait of Hormuz and disruptions to those shipments are already pushing up agricultural input costs. The effects on the next growing cycle are only now beginning to emerge. Analysts project a 16 percent rise in global commodity prices. For economies with deep fiscal buffers and diverse import sources, this may appear manageable. For those without such advantages, the consequences are devastating.
Asia has borne the brunt of the crisis. The region receives around 85 percent of all crude shipments from the Gulf and oil imports fell by 30 percent year-on-year in April alone, reaching their lowest level since October 2015. Responses have been improvised and costly.
Japan, which relies on the Middle East for 95 percent of its oil, has turned to American crude, purchasing it at spot market prices inflated by a war premium and shouldering the added shipping costs for a journey that takes twice as long. Indonesia, Southeast Asia’s largest economy, is seeking alternative suppliers in Africa and Latin America and has committed to purchasing 150 million barrels from Russia by the end of the year.
Vietnam, which depends on the Middle East for at least 85 percent of its crude imports, is among the continent’s most-exposed economies. The irony is acute, as the country’s export-oriented manufacturing sector relies on affordable energy to remain competitive. Thailand, which usually imports up to 70 percent of its crude from the Middle East, has introduced government-mandated energy-saving measures, including encouraging remote work to reduce fuel consumption. These responses are real indications of a structural realignment in global energy flows.
The impact on the Global South goes far beyond energy bills. In South Asia and East Africa, higher import costs and currency depreciation are creating serious fiscal stress. Governments are spending billions on duty waivers and fuel subsidies to shield households from the full impact of the crisis — measures that provide short-term relief but add to long-term debt.
In economies where most household income is spent on food, the link between energy prices and food security is immediate. Fertilizer costs rise, food prices follow and purchasing power falls, leaving little margin for error. In 2026, this dilemma between food and fuel is being imposed on governments that neither caused the conflict nor have any ability to resolve it.
The Middle East and North Africa region is at the heart of this global energy transformation. Gulf states are the world’s leading energy exporters, yet they are also directly exposed to the ripple effects of the crisis, with the UAE alone accounting for 18 percent of vessel traffic through the strait. Their wealth provides resilience that neighbors cannot match, but it does not guarantee immunity.
For the broader region, the situation is a defining moment. Some countries, such as Turkiye, could seize this opportunity to establish themselves as hubs for international trade. Buyers are diversifying because the route to market has become uncertain. If that uncertainty persists, it will leave a lasting mark on Gulf export relationships.
The Strait of Hormuz crisis has reminded the world, and the region itself, that geography may not dictate destiny but, in moments like this, it comes perilously close.
- Zaid M. Belbagi is a political commentator and an adviser to private clients between London and the Gulf Cooperation Council.
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