United Nations, Mar 11: The United Nations has warned that a possible closure of the Strait of Hormuz amid escalating tensions in West Asia could disrupt global trade and trigger higher food prices and increased cost-of-living pressures worldwide.
In a report released Tuesday, the UN Conference on Trade and Development (UNCTAD) said the ongoing military escalation following US-Israeli strikes on Iran and Tehran’s retaliation has already disrupted shipping flows through the strategically vital waterway.
The Strait of Hormuz, one of the world’s most critical maritime chokepoints, carries nearly a quarter of global seaborne oil trade along with significant volumes of liquefied natural gas and fertilisers.
“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 added.
Stephane Dujarric, spokesman for UN Secretary-General Antonio Guterres, said during a daily press briefing that UNCTAD’s economic analysis highlights “significant risks to global trade and development” if the strait is closed.
The report stressed that disruptions in the Strait of Hormuz underscore the vulnerability of critical maritime chokepoints to geopolitical tensions and their ability to transmit shocks across supply chains and commodity markets.
It emphasised that reducing risks to global trade and development requires de-escalation, protection of maritime transport, ports and seafarers, and the safeguarding of 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 noted that many developing countries are already grappling with high debt service burdens, limited fiscal space and restricted access to finance.
In such conditions, rising energy, transport and food costs could strain public finances and household budgets, potentially intensifying 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, around 20 million barrels of oil per day — roughly 25 per cent of global seaborne oil trade — passed through the Strait of Hormuz in 2024. Of this, crude oil and condensate accounted for 14 million barrels per day, while petroleum products made up about 6 million barrels per day.
Data from a week before the latest escalation showed that 38 per cent of global seaborne crude oil trade, 29 per cent of liquefied petroleum gas trade and 19 per cent each of liquefied natural gas and refined oil products passed through the strait.
However, since February 28, when the first strikes on Iran were launched by the United States and Israel, ship traffic through the Strait of Hormuz has dropped by 97 per cent.
UNCTAD warned that such disruptions could significantly affect global energy supplies, particularly to Asia.
In 2024, about 84 per cent of the 14.3 million barrels of crude oil transported daily through the strait were destined for Asian markets, while only 16 per cent went to Europe and other regions.
Similarly, 83 per cent of the 10.4 billion cubic feet of liquefied natural gas shipped each day through the waterway was bound for Asia.
The strait also carries around one-third of global seaborne fertiliser trade — about 16 million tonnes annually.
Highlighting the potential ripple effects, the UN agency noted that rising oil prices often lead to higher food prices, while increasing gas prices push fertiliser costs up.
“The current shock comes at a time when many developing economies struggle to service their debt, face tightening fiscal space and have limited capacity to absorb new price shocks,” the report said. (Agencies)
