The ongoing war between US-Israel and Iran has almost brought tanker traffic through the Strait of Hormuz to a standstill, causing sharp swings in oil prices and underlining how crucial the narrow waterway is for global energy supplies, reported AP. Tehran’s Revolutionary Guards have vowed to block oil exports through the Strait, saying they will not allow “even a single litre” to be shipped to countries they see as enemies if hostilities continue.
Meanwhile, the United Nations (UN) has warned of significant risks to global trade and development, including higher food prices and cost-of-living, if the Strait of Hormuz is closed amid the West Asia conflict.
The UN Conference on Trade and Development (UNCTAD) said in a report Tuesday that the ongoing military escalation in the region due to the US-Israeli strikes on Iran and retaliation by Tehran has disrupted shipping flows through the Strait of Hormuz, one of the world's most critical maritime chokepoints.
The narrow passage carries around a quarter of global seaborne oil trade and significant volumes of liquefied natural gas and fertilisers.
Here's what the UN said
Stephane Dujarric, Spokesman for UN Secretary-General Antonio Guterres, said at the daily press briefing that UNCTAD's economic analysis on the potential impact of a closure of the Strait of Hormuz highlights "significant risks to global trade and development".
"The resulting ripple effects go far beyond the region, affecting energy markets, maritime transport and global supply chains," the report said. “Higher energy, fertiliser and transport costs – including freight rates, bunker fuel prices and insurance premiums – may increase food costs and intensify cost-of-living pressures, particularly for the most vulnerable,” it said, as reported by PTI.
The UNCTAD report stressed that 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, PTI reported.
The report added that 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," UNCTAD said.
The report said many developing countries already face high debt service burdens, limited fiscal space and constrained access to finance.
In such a context, rising energy, transport and food costs could strain public finances and household budgets, potentially heightening economic and social pressures and complicating progress toward sustainable development, particularly in economies heavily dependent on imported energy, fertilisers and staple foods.
According to UNCTAD data, about 20 million barrels of oil per day - roughly 25% of global seaborne oil trade - passed through the Strait of Hormuz in 2024. Of them, crude oil and condensate accounted for 14 million bpd and petroleum products for 6 million bpd.
Data from a week prior to the latest West Asia escalation showed that 38% of global seaborne crude oil trade, 29% of liquefied petroleum gas trade and 19% each of liquefied natural gas and refined oil products passed through the Strait.
Since the initial strikes on Iran by the United States and Israel on 28 February, shipping traffic through the Strait of Hormuz has fallen by 97%. UNCTAD has warned that such disruptions threaten energy supplies, particularly to Asia.
In 2024, 84% of the 14.3 million barrels per day of crude oil transported through the Strait were bound for Asian markets, while only 16% was destined for Europe and other regions.
Similarly, 83% of the 10.4 billion cubic feet of liquefied natural gas shipped daily through the Strait was bound for Asia. Around one-third of the global seaborne fertiliser trade, about 16 million tonnes annually, also passes through the waterway, UNCTAD said.
Warning that ripple effects of a possible closure of the Strait can travel far, the UN agency said, "When oil prices go up, food prices often go up. When gas prices go up, fertiliser prices often go up."
"The current shock comes at a time when many developing economies struggle to service their debt, face a tightening of fiscal space and limited capacity to absorb new price shocks," it said.
Strategic importance of the Strait of Hormuz
Although pipelines in Saudi Arabia and the UAE provide alternative routes, the US Energy Information Administration notes that “most volumes that transit the strait have no alternative means of exiting the region.” Past threats to the Strait have driven up global energy prices, such as during the Israel–Iran conflict in June.
