The ongoing war with Iran has nearly halted tanker traffic through the Strait of Hormuz, sending oil prices soaring and underscoring how critical the narrow waterway is to global energy supplies, the AP reports. Tehran’s Revolutionary Guards have vowed to block oil exports through the strait, saying they will not allow “not a single liter” to be shipped to countries they consider enemies if hostilities continue.
Meanwhile, the United Nations has warned of significant risks to global trade and development, including higher food prices and the cost of living, if the Strait of Hormuz is closed amid conflict in West Asia.
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The United Nations Conference on Trade and Development (UNCTAD) said in a report on Tuesday that continued military escalation in the region due to US-Israeli attacks on Iran and retaliation by Tehran has disrupted shipping flows through the Strait of Hormuz, one of the world’s most critical maritime hubs.
The narrow passage carries roughly a quarter of the world’s seaborne oil trade and significant volumes of liquefied natural gas and fertilizers.
Here’s what the UN said
Stephane Dujarric, a spokesman for UN Secretary-General Antonio Guterres, told a daily news conference that UNCTAD’s economic analysis of the potential impact of closing 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 costs of energy, fertilizers and transport – including freight rates, tank fuel prices and insurance premiums – may increase food costs and intensify cost-of-living pressures, especially for the most vulnerable,” PTI said.
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The UNCTAD report highlighted that disruptions in the Strait of Hormuz underscore the “vulnerability” of critical maritime hotspots to geopolitical tensions and their potential to transmit shocks across supply chains and commodity markets, PTI reported.
She further noted that reducing risks to world trade and development, including risks to the environment, requires easing tensions and protecting maritime transport, ports and seafarers and other civilian infrastructure while maintaining safe trade corridors in accordance with international law and freedom of navigation.
The report notes that many developing countries already face high debt service burdens, limited fiscal space and limited access to finance.
In such a context, rising energy, transport and food costs could strain public finances and household budgets, potentially increasing economic and social pressures and complicating progress towards sustainable development, especially in economies heavily dependent on imported energy, fertilizers and staple foods.
According to UNCTAD data, about 20 million barrels of oil per day passed through the Strait of Hormuz in 2024 – roughly 25 percent of global seaborne oil trade. Of this, oil and condensate accounted for 14 million barrels per day and petroleum products for 6 million barrels per day.
Data from the week before the latest escalation in West Asia showed that 38 percent of global seaborne oil trade, 29 percent of liquefied petroleum gas and 19 percent of liquefied natural gas and refined petroleum products passed through the strait.
Since the initial strikes by the United States and Israel on Iran on February 28, shipping through the Strait of Hormuz has dropped by 97%. The United Nations Conference on Trade and Development (UNCTAD) has warned that such disruptions threaten energy supplies, particularly to Asia.
Key energy infrastructure in the Persian Gulf
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In 2024, 84% of the 14.3 million barrels of oil per day transported through the strait was destined for Asian markets, while only 16% was destined for Europe and other regions.
Similarly, 83 percent of the 10.4 billion cubic feet of liquefied natural gas transported daily through the strait went to Asia. About one-third of the global marine fertilizer trade, about 16 million tons a year, also goes through waterways, UNCTAD said.
The UN agency warned that the knock-on effects of a possible strait closure could spread far, saying: “When oil prices go up, food prices often go up. When gas prices go up, fertilizer prices often go up.”
“The current shock comes at a time when many developing economies are struggling to service their debts, facing a tightening of fiscal space and limited capacity to absorb new price shocks,” the statement said.
The strategic importance of the Strait of Hormuz
Historically, the Strait of Hormuz was a key trade route that facilitated the movement of ceramics, ivory, silk and textiles from China. Today, it serves as a vital corridor for supertankers carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran, with most shipments headed for Asian markets, including China, which is Iran’s only remaining oil buyer, the AP report said.
Although pipelines in Saudi Arabia and the United Arab Emirates provide alternative routes, the US Energy Information Administration notes that “most of the volumes that pass through the strait have no alternative means of exiting the region”. Past threats to the strait have driven global energy prices higher, such as during the Israel-Iran conflict in June.
(With input from agencies)
