-
The United Nations Trade and Development warned against the ripple effects of the restricted passage through the Hormuz Strait, particularly on energy supply, the maritime industry, and fertilizers for food production
-
UNCTAD’s rapid analysis report noted that ships passing through Hormuz dropped by 97% from an average of 129 per day to only seven in the first week of March
-
Vessels that pass through Hormuz Strait carry about 25% of global seaborne oil trade, significant volumes of liquefied natural gas and fertilizers
-
Higher war risk insurance means that a typical premium that cost $250,000 per voyage has now doubled or gone up to as much as $1 million per voyage
-
Higher power, fertilizer and transport costs translate to higher food prices and intensify cost-of-living pressures, particularly for the most vulnerable economies
The United Nations Trade and Development (UNCTAD) has warned against the ripple effects of the restricted passage through the Hormuz Strait, particularly on energy supply, the maritime industry, and fertilizers for food production.
Disruptions in the Strait of Hormuz highlight the vulnerability of critical maritime chokepoints to geopolitical tensions and their potential to transmit shocks across global supply chains and commodity markets, UNCTAD noted in a rapid analysis report titled Strait of Hormuz Disruptions – Implications for Global Trade and Development.
The report cites that from February 1 to 27, an average of 129 ships per day passed through Hormuz. This dropped to 81 on February 28 when the United States and Israel attacked Iran. In the first week of March, the cut was staggering at 97% with only seven ships managing to transit through the critical waterway.
READ: Major shipping lines suspend transits to/from Middle East
Vessels that pass through Hormuz strait carry about 25% of global seaborne oil trade, significant volumes of liquefied natural gas (LNG) and fertilizers.
Based on data from the US Energy Information Administration, more than 80% of the crude oil and LNG delivered out of the strait go to economies in Asia.
“Higher energy, fertilizer 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,” UNCTAD said in the report.
READ: Prolonged Middle East crisis will drive up agri logistics costs– DA
On the maritime sector, the UN agency pointed out that freight rates for oil tankers and war risk insurance premiums are surging while marine fuel costs are also rising. This translates to increased shipping costs across different supply chains.
READ: IMO chief alarmed over Hormuz attacks as oil route risks escalate
UNCTAD calculated – citing Kpler, Lloyd’s List and Marine Insight – that a typical insurance premium for a $100-million vessel which normally costs $250,000 per voyage has now doubled or gone up to as much as $1 million per voyage.
READ: Global shipping org BIMCO says Trump’s insurance offer unclear
Developing economies are seen to suffer more from the Middle East conflict as they are already facing high debt service burdens and limited fiscal space to address the higher costs.
“In this context, rising energy, transport and food costs could strain public finances and increase pressure on household budgets, potentially heightening economic and social pressures and complicating progress toward sustainable development, particularly in economies heavily dependent on imported energy, fertilizers and staple foods,” UNCTAD said.
READ: Business groups ask gov’t to help minimize Middle East crisis impact
