Dire Strait of Hormuz: A Chokepoint for Global Food and Energy

forthcoming at the Policy Center for the New South

We are now in the ninth week since the U.S. airstrike that killed top leaders of the Iranian regime, initiating a war involving the United States and Israel against the country. After more than a month of mutual bombardments between Iran and Israel ensued, extending to other Persian Gulf nations and U.S. military installations. From a global perspective, the impact has stemmed primarily from disruptions to regional production of goods and the blockade of the Strait of Hormuz.

Iran’s disruption of transportation via the Strait of Hormuz – the most vital passageway for the world’s energy supply – has been a weapon utilized since the start of the conflict, more recently also accompanied by a blockade by the U.S. Navy. Cross attacks have stopped – or almost – with the two-week cease-fire announced on April 8^th, but the traffic through the strait of Hormuz remained restricted.

The outbreak of conflict in the Middle East has triggered a multi-layered shock to the global economy and financial markets. The severity of global consequences will depend on the duration of disruptions—particularly to the Strait of Hormuz—and the policy responses of governments and central banks.

We approach here the transmission channels through which conflict has affected global energy markets, commodity supply and prices, transportation systems, macroeconomic conditions, and financial markets. Rather than focusing only on oil and gas supply, we trace how the disruption in the Strait of Hormuz and related infrastructure has potentially propagated through shipping, aviation, food costs, remittances, inflation expectations, and central-bank responses. Although short-term disruptions may produce volatility without structural transformation, prolonged conflict risks leading to stagflation, change of trade patterns, and reshaping global financial dynamics.

1. Energy Market Disruptions and Global Supply Shocks

It is no coincidence that Fatih Birol—head of the International Energy Agency (IEA)—stated that a war with Iran poses the greatest threat to global energy “in history.” The most immediate and significant impact of the Middle East conflict is on global energy markets. The Strait of Hormuz, through which approximately 30% of global oil trade has flowed, represents a critical chokepoint. Even a temporary disruption has outsized consequences for global supply chains and price formation.

Figure 1 displays how the traffic of vessels has been affected since the start of the conflict, and how low the crude oil numbers booked have been. One must keep sight of the fact that until the last few weeks the oil – and other shipments – that crossed the strait before the war were still reaching their destination, and only now the effects in terms of physical supply constraints will start to be plain fully felt.

There is a sequence, with current and future price shocks coming first, followed by physical supply constraints afterwards. The Iran shock has already moved beyond a pure price shock, as ships that have crossed the Hormuz before the start of the war have reached their destinations.  The ceasefire feeds hopes of a gradual normalization, while the possibility of accelerating physical breakdown remains.

Figure 1 – Hormuz Chokepoint Tracker

Source: Financial Times, April 21, 2026.

The disruption has removed approximately 6.5 million barrels per day (mb/d) from global oil supply, resulting in a substantial inventory drawdown and pushing Brent crude prices to around $90 per barrel (Figure 2). This price increase reflects not only the physical loss of supply but also a geopolitical risk premium embedded in market expectations.

Figure 2

Source: Alpine Macro, U.S. Themes and Strategy, April 16, 2026

Although the conflict remains unresolved and disruptive tail risks linger, their perception by most analysts has receded, leading to a baseline scenario which incorporates a Strait opening sometime in the coming weeks. But in a more severe scenario—say, longer than a three-month disruption—the consequences become dramatically more pronounced.

According to Natixis (2026), oil prices could theoretically rise above $170 per barrel based on supply-demand fundamentals, though strategic reserves and demand destruction would likely cap prices at lower levels, around $115 per barrel. It was close to $90 on April 18, when the Strait was closed again from both sides. The absence of comparable strategic reserves in natural gas markets makes gas prices even more sensitive, with European gas prices potentially exceeding €100/MWh under prolonged disruption.

As an optimistic baseline scenario, Alpine Macro (2026) research team estimates that the return of crude oil output currently offline will be gradual over the next 1-3 months. This is consistent with Brent futures prices not far from near dated futures at $95/bbl and $88/bbl one and three months out, respectively, as well as the explosive rise in seaborne costs of transporting both crude and refined oil products (Figure 3).

Figure 3

Source: Alpine Macro, U.S. Themes and Strategy, April 16, 2026

Alpine Macro (2026) expects oil to settle somewhere around $70-80/bbl in the next few months in the case of an end to hostilities, with a residual geopolitical risk premium of $5–$10/bbl compared to prewar levels that will likely remain over this period, as a result of higher maritime transportation and insurance costs, as well as the time required to repair and fully restore damaged energy infrastructure.

According to the IEA, as of the end of March, more than 40 energy facilities across Gulf producers have sustained severe damage during the conflict. Restoration of output should take weeks to months, depending on the extent of the damage. The two most severely damaged pieces of infrastructure relate to natural gas rather than oil.

Oil demand is relatively inelastic in the short run, meaning that large price increases are required to reduce consumption. However, over time, sustained high prices can lead to behavioral changes, reduced economic activity, and substitution toward alternative energy sources.

The energy shock also has asymmetric regional effects. Asia is particularly vulnerable due to its heavy reliance on Middle Eastern energy imports (Figures 4a and 4b). Countries such as Japan and India face high exposure, with limited immediate alternatives.

Figure 4a

Figure 4b

Source: Natixis, Middle East Conflict: Counting the Shocks on the Global Economy and Impact on Financial Markets, March 10, 2026

Europe, while less directly dependent on Middle Eastern oil, remains vulnerable through global price transmission mechanisms and its dependence on liquefied natural gas (LNG). In Latin America and Sub-Saharan Africa, commodity exporters may benefit while import-dependent economies are being negatively impacted through external balances, inflation, and fiscal dynamics.

Effects are asymmetric, differentiated according to whether a country is an exporter or importer of oil and gas. Figure 5, taken from Estevão et al (2026), shows how gasoline prices have surged in the U.S. (left), and how a rise in input costs has been a general feature (right). The transmission is no longer confined to crude benchmarks, with refined products, feedstock, and logistics still carrying the shock into the real economy.

Figure 5

Source: Estevão, M.; Forton, J.; and Hamilton, L. The Iran Shock: From Prices to Constraints, IIF Global Macro Views, Institute of International Finance, April 16, 2026.

Whether the war ends in a negotiated settlement or in a frozen stand-off, it’s possible that transit in the Strait of Hormuz does not return to pre-war levels. As Kristalina Georgieva, IMF Managing Director, said in a presentation during the IMF-World Bank Spring Meetings: “Even in a best case, there will be no neat and clean return to the status quo ante”.

2. Commodity Markets Beyond Energy and Global Food Security

The conflict’s impact extends beyond oil and gas into broader commodity markets, particularly metals and industrial inputs. The Middle East plays a significant role in the production of aluminum and sulfur, both of which are critical to global manufacturing and resource extraction.

Aluminum prices have already increased due to disruptions affecting approximately 8% of global supply. While some of this increase may be temporary, prolonged conflict could sustain elevated prices due to higher energy costs and transportation disruptions.

The war-affected Middle East has become an indispensable engine of modern agriculture and industrial manufacturing (Hanieh, 2026). The disruption to sulfur and sulfuric acid supply chains is a major concern. Sulfuric acid is essential for the extraction of metals such as copper and nickel.

The region provides 45% of globally traded seaborne sulfur. This byproduct of oil and gas desulfurization is the primary feedstock for sulfuric acid, a fundamental input required not just for phosphate fertilizers, but for copper mining, battery metals, and semiconductor fabrication.

The implications for nickel are particularly severe. Indonesia, which produces over half of the world’s nickel, relies heavily on imported sulfur. Supply disruptions could therefore constrain production and increase prices, especially for battery-grade nickel used in electric vehicles.

Furthermore, the Gulf provides roughly 30% of internationally traded ammonia—the starting point for all mineral nitrogen fertilizers. Saudi Arabia and Oman are respectively the world’s second and sixth largest exporters of ammonia. State-owned giants like Saudi Aramco and Adnoc (UAE) have moved down the value chain, using financial surpluses to dominate the production of finished fertilizers like Urea, DAP, and MAP. The paralysis of the Strait of Hormuz has created a “double squeeze” on global supply chains, provoking a “cascading industrial and agricultural squeeze”, as remarked by Hanieh (2026). Figure 6 shows how the world’s top importers of fertilizer depend on the Gulf.

Figure 6

Source: Hanieh, A.; The coming global food crisis, Financial Times, April 18, 2026.

There is also an important Morocco-Gulf link: Morocco, the world’s largest phosphate producer, is deeply dependent on the Gulf, which provides 75% of its sulfur and 30% of its ammonia. Without these Middle Eastern inputs, Morocco’s ability to supply the world with phosphate fertilizers is crippled.

In March, fertilizer prices rose 26.2%. The UN Food and Agriculture Organization warns that if the crisis persists through the first half of the year, prices could sustain levels 15% to 20% higher than previous averages, coinciding with the Northern Hemisphere’s crucial spring planting (FAO, 2026).

The deeper integration of the Gulf into the global food system means that regional shocks now cascade rapidly from “farm to shelf.” Import-dependent nations are the hardest hit. In 2024, Sudan imported 54% of its fertilizers from the Gulf, followed by Sri Lanka (36%) and Tanzania (31%). These nations lack the fiscal buffers to subsidize farmers against the 2026 price shocks.

The World Food Programme (2026) estimates that the war will push an additional 45 million people into acute hunger, with two-thirds of those affected located in Africa. Sudan is the direst case, where famine conditions are already appearing amidst the world’s worst displacement crisis.

There are also high-tech bottlenecks and semiconductor vulnerability because of the war. With seaborne sulfur exports largely paused, mining operations in Chile and Australia face soaring costs for copper and battery metal extraction. Simultaneously, the semiconductor and EV sectors see foundational input costs rise as nitric and sulfuric acid outputs decline.

Constraints in the global supply of highly purified helium complete this picture of modern supply chain vulnerability (Natixis, 2026). The state of Qatar reliably supplies approximately one-third of the world’s critical helium requirements, extracted as an integrated byproduct of its natural gas liquefaction operations. The broader Gulf disruptions have hampered production schedules, while restricted access to the Strait of Hormuz prevents remaining packaged cargoes from reaching vital Asian semiconductor fabrication plants.

Helium remains fundamentally irreplaceable in advanced semiconductor manufacturing processes. It uniquely cools delicate processing equipment during extreme ultra-violet lithography and purges disruptive oxygen during silicon crystal growth. Top-tier consumer chipmakers consequently face unavoidable production adjustments at a historical moment when enterprise demand for computing hardware is steadily expanding

The current conflict is fundamentally different from previous shocks. Because the Gulf states now control the logistical corridors and chemical inputs for global agribusiness, any prolonged disruption to regional infrastructure threatens the structural stability of global food security and the high-tech industrial economy. Regionally, countries in Africa, South America and South and Southeast Asia spend the largest portion of GDP on fertilizer imports (Figure 7).

Figure 7

Source: Svenstrup, M.; Martinez, M.; and Landers, C.; Will the Iran War Be the Breaking Point for Vulnerable Countries? Center for Global Development, March 20, 2026.

3. Transportation and Trade Disruptions

The conflict has also disrupted global transportation networks, affecting both maritime shipping and air travel (Figure 8). The closure of the Strait of Hormuz has reduced oil and LNG shipments, while broader geopolitical instability has impacted shipping routes and insurance costs.

Figure 8

Source: Georgieva, K.; Cushioning the Middle East War Shock, April 9, 2026.

Some shipping sectors have benefited in the short term. Delays in Suez Canal traffic have helped rebalance supply-demand dynamics in the shipping industry, temporarily boosting freight rates. However, these benefits are likely to be short-lived if demand weakens due to higher costs and economic uncertainty.

Air travel has been more negatively affected. Airport closures and rerouted flights have increased costs for airlines, particularly in Europe and the Middle East. Fuel costs—already a major component of airline expenses—have risen sharply, further compressing margins.

Tourism is another sector at risk. While historical patterns suggest that tourism tends to recover quickly after geopolitical shocks, prolonged instability could damage the region’s reputation as a travel destination, particularly for Gulf economies that rely on tourism for diversification.

4. Macroeconomic Impacts: Inflation, Growth, and Stagflation Risks

At the macroeconomic level, the conflict introduces a classic supply-side shock: rising input costs combined with slowing growth. This combination raises the risk of stagflation—a scenario characterized by high inflation and weak economic activity.

One may identify several transmission channels through which the ongoing conflict affects global economies:

• Higher Energy and Food Costs: Increased oil and gas prices raise production and transportation costs across industries, leading to higher consumer prices. Higher prices and less availability of fertilizers may also impact food production.
• Trade Disruptions: Reduced shipping capacity and higher costs hinder global trade flows.
• Financial Tightening: Increased uncertainty leads to tighter financial conditions and reduced investment.
• Income Effects: Reduced remittances and tourism revenues affect household incomes in vulnerable economies.

As Georgieva (2026) showed in her presentation during the Spring Meetings, markets have been expecting major central banks to tighten their policy stance (Figure 9, left). This is happening in a context in which public debt is generally much higher than 20 years ago – including in most G20 countries (Figure 9, center) – and interest payments are rising as a share of revenue at all income levels (Figure 9, right).

Figure 9

Source: Georgieva, K.; Cushioning the Middle East War Shock, April 9, 2026.

It is relevant to call attention to the fact that current shock is happening at a moment of debt distress for many developing countries (Songwe, 2026). Developing countries paid $921 billion in interest in 2024. As the war drives up energy and food prices, inflationary pressures are forcing interest rates higher, making finance scarcer for the 3.4 billion people living in countries that spend more on debt service than on health or education.

Svenstrup et al (2026) explore what may make the Iran war “a breaking point for vulnerable countries”. They point out six transmission mechanisms from the Middle East conflict to Emerging Market vulnerability: net energy imports, fossil fuel subsidies, external debt service obligations, fertilizer imports, Gulf-origin remittances, and reserve/import ratio.

A range of potential disruptions to the global economy are detailed in the IMF’s World Economic Outlook report released during the Spring Meetings (IMF, 2026). It sets out three scenarios: the reference forecast scenario, the adverse scenario, and the severe scenario. Considered to be the baseline and most likely scenario, the reference forecast sees global growth falling to 3.1 percent this year, revised down from 3.3 percent in January, and headline inflation rising to 4.4 percent. The adverse scenario—which assumes continued supply chain disruption and higher energy prices—sees growth fall to 2.5 percent and inflation rises to 5.4 percent. The least likely but most severe scenario—which assumes supply disruptions continue through next year—sees global growth tumble to 2 percent and inflation surge above 6 percent.

5. Financial Market Reactions and Asset Allocation

Financial markets have responded to the conflict with increased volatility and a shift toward safe-haven assets. The U.S. dollar and Swiss franc have appreciated, reflecting investor demand for stability.

Equity markets have shown divergent performance. U.S. equities have outperformed, reflecting relative economic resilience and safe-haven status. In contrast, Asian and emerging market equities have lagged due to their greater exposure to energy shocks and trade disruptions.

Bond markets have also reacted, widening spreads in European sovereign debt, particularly for countries such as France and Italy. This reflects increased fiscal risks and uncertainty.

In foreign exchange markets, the initial strengthening of the U.S. dollar is expected to reverse over time, particularly if the conflict remains contained. One may also anticipate a recovery in the euro and yen against the dollar in the longer term.

Real estate markets may also be affected. Increased geopolitical risk could drive investment toward perceived safe-haven regions, particularly in Western Europe and parts of Asia.

6. Policy Responses and Strategic Implications

Government and central bank responses will play a critical role in shaping the ultimate economic impact of the conflict. Key policy tools include:

• Strategic Reserve Releases: Governments can release oil reserves to stabilize prices and offset supply disruptions. However, the lack of equivalent reserves for natural gas limits policy options in that market.
• Monetary Policy Adjustments: Central banks may adjust interest rates in response to inflation and growth dynamics.
• Fiscal Measures: Subsidies and targeted support can mitigate the impact on households and businesses.
• Trade Policies: Export restrictions and protectionist measures may be used to secure domestic supply.

Figure 10 lists national energy policy responses that have already been taken.

Figure 10

Source: Georgieva, K.; Cushioning the Middle East War Shock, April 9, 2026

In the longer term, the conflict may accelerate structural changes in global energy markets. Countries may seek to diversify energy sources, increase domestic production, and invest in renewable energy to reduce dependence on geopolitically sensitive regions.

Final Remarks

The Middle East conflict represents a significant exogenous shock to the global economy, with far-reaching implications across energy markets, commodities, transportation, and financial systems. While short-term disruptions may lead to temporary volatility, prolonged conflict poses a more serious threat, including the risk of stagflation, structural shifts in trade patterns, and sustained financial instability.

The analysis underscores the central role of energy markets in transmitting geopolitical shocks. Disruptions to the Strait of Hormuz have cascading effects across global supply chains, commodity markets, and macroeconomic conditions. At the same time, the impact is unevenly distributed, with Asia and energy-importing economies bearing the greatest burden.

Asia emerges as the most affected region outside the Middle East. Countries such as Thailand, South Korea, and the Philippines face rising import costs, worsening current account balances, and increased inflation.

Europe faces a more moderate but still significant impact. While not directly affected by supply disruptions, higher energy prices could slow growth and increase inflation. The extent of the impact depends on the duration of the conflict. A short disruption would have limited effects, while a prolonged conflict could lead to sustained inflation and tighter monetary policy.

In the United States, the impact is somewhat mitigated by domestic energy production. However, sustained high oil prices could still lead to higher inflation and slower growth. The impact of Iran war will stay even after conflict ends, as higher fuel prices feed through into businesses and the wave of inflation remains (McCormick et al, 2026).

Latin America faces a mixed outlook. While some commodity exporters may benefit from higher prices, the region as a whole is likely to experience weaker growth, higher inflation, and currency depreciation. As an example, while Brazil’s production and exports of oil will gain in terms-of-trade, rising prices of imported diesel and fertilizers will hurt (Canuto, 2026).

Ultimately, the severity of the economic consequences will depend on the duration of the conflict and the effectiveness of policy responses. Strategic reserves, monetary policy, and international coordination will be critical in mitigating the impact. However, the conflict also highlights the vulnerability of the global economy to geopolitical risks and underscores the importance of diversification and resilience in energy and trade systems.

In a world increasingly shaped by geopolitical uncertainty, the lessons of this conflict extend beyond immediate market reactions. They point to the need for structural adaptation, strategic foresight, and coordinated global responses to ensure economic stability in the face of future shocks.

References

Alpine Macro; U.S. Themes and Strategy, April 16, 2026.

Canuto, O.; Transmission Channels of the War on Iran to the Brazilian Economy, Policy Center for the New South, April 1, 2026.

Estevão, M.; Forton, J.; and Hamilton, L;. The Iran Shock: From Prices to Constraints, IIF Global Macro Views, Institute of International Finance, April 16, 2026.

FAO – Food and Agriculture Organization of the United Nations. FAO Chief Economist warns of severe global food security risks from disruption to Strait of Hormuz trade corridor, March 26, 2026.

Georgieva, K.; Cushioning the Middle East War Shock; Speech at the 2026 Spring Meetings in Washington, DC

Hanieh, A.; The Coming Global Food Crisis, Financial Times, April 18, 2026.

IMF – International Monetary Fund; World Economic Outlook, ch.1 Global Prospects and Policies, April, 2026.

McCormick, M.; Stephanie, F.; Meyer, G.; and Roeder, O. Impact of Iran war will hurt US even after conflict ends, economists warn, Financial Times, April 20, 2026.

Natixis; Middle East Conflict: Counting the Shocks on the Global Economy and Impact on Financial Markets, March 10, 2026

World Food Programme; Projected increase in acute food insecurity due to the Middle East conflict, March 23, 2026.

Songwe, V.; America’s War Is Adding to Africa’s Debt Burden, Project Syndicate, April 9, 2026.

Svenstrup, M.; Martinez, M.; and Landers, C.; Will the Iran War Be the Breaking Point for Vulnerable Countries? Center for Global Development, March 20, 2026.

Otaviano Canuto, based in Washington, D.C, is a former vice president and a former executive director at the World Bank, a former executive director at the International Monetary Fund, and a former vice president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at the University of São Paulo and the University of Campinas, Brazil. Currently, he is a senior fellow at the Policy Center for the New South, a professorial lecturer of international affairs at the Elliott School of International Affairs – George Washington University, a nonresident senior fellow at Brookings Institution, a professor affiliate at UM6P, and principal at Center for Macroeconomics and Development