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The Strait of Hormuz remains “practically closed,” disrupting a critical share of global oil and gas flows, according to a new rapid assessment by the UN Trade and Development
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Sharp slowdown in global merchandise trade is forecast, to 1.5% to 2.5% in 2026 from about 4.7% growth in 2025
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Energy shocks are jacking up prices and raising the cost of living
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Investors are pulling capital from developing markets, weakening currencies and kicking up borrowing costs
The virtual closure of the Strait of Hormuz has sent shockwaves through the global economy, according to a second rapid assessment by UN Trade and Development (UNCTAD). What began as a localized disruption of a vital energy corridor is now destabilizing global trade, fueling inflation, and straining international finance, the UN agency said.
Activity in the Strait has plummeted by approximately 95%, with daily ship transits dropping from 130 in February to just six in March. This standstill has choked the flow of essential oil and gas, causing immediate spikes in fuel prices and transport costs that are now rippling through global supply chains, UNCTAD said.
Since the escalation of the Middle East conflict on February 28, fuel prices have grown sharply and remain elevated. The cost of transporting oil has at the same time jumped significantly. “These increases are feeding through supply chains, raising the cost of producing and moving goods across the world,” UNCTAD said.
“Not all shipping is affected equally. Oil and liquefied natural gas carriers, which rely heavily on Gulf routes, have been hit hardest, facing reduced volumes and higher risk costs. Other segments, such as container and dry bulk shipping, are more insulated but still affected by rising costs and disruptions,” it added.
“If disruptions persist or intensify, damage to energy infrastructure could keep prices elevated for longer, prolonging inflationary pressures. Regions more dependent on Middle East energy imports, particularly South Asia and Europe, would be more exposed.”
While 2026 began with strong economic indicators, the agency projects a sharp deceleration. Key forecasts include:
- Merchandise trade: Growth is expected to tumble from 4.7% in 2025 to between 1.5% and 2.5% this year.
- Global GDP: Growth is projected to slow to 2.6%, down from 2.9% in 2025.
The report highlights a “flight to safety” among investors, who are pulling capital from developing markets. This has led to:
- Currency depreciation: Weakening local currencies are making imports of food and medicine more expensive.
- Rising debt stress: Approximately 3.4 billion people live in nations where debt servicing already outpaces spending on health or education.
UNCTAD warns that if the disruption persists, the combination of high energy costs and tighter financial conditions could evolve into a cascading global crisis, disproportionately impacting the world’s most vulnerable populations.
READ: PH to ask Iran for safe passage of oil through Strait of Hormuz
