THE IMPACT OF THE CLOSURE OF THE STRAIT OF HORMUZ ON THE GLOBAL ECONOMY

Abstract

The Strait of Hormuz is a critical global energy chokepoint linking the Persian Gulf to the Indian Ocean. Approximately 20% of the world’s daily oil supply and a major share of LNG (notably from Qatar and the UAE) transit this narrow waterway. Gulf producers, especially Saudi Arabia, Iraq, the UAE, Kuwait, and Iran, depend heavily on it for exports; it is the sole maritime outlet for several countries.
The paper reviews the strait’s strategic and economic importance, including spare oil production capacity (Saudi Arabia dominant at 6.23 mb/d) and regional gas output (Iran, Qatar, and Saudi Arabia leading).
Drawing on data linked to a late-February 2026 military escalation, it examines disruption impacts: a sharp ~95% drop in daily ship transits, oil prices surging above $110–126 per barrel across major benchmarks, higher inflation (stronger in developing economies), slower global merchandise trade and GDP growth, currency depreciation in developing regions, and rising sovereign borrowing costs (largest increases in Developing Asia & Oceania and Africa).
The conclusion stresses that prolonged disruption would destabilize energy markets, inflate costs, and constrain global growth. Securing the strait, diversifying routes, building strategic reserves, and advancing energy transition and maritime cooperation are essential for resilience.