Hormuz Disruption Deepens Global Economic Strain Across Trade, Prices and Finance

Economy, Industry April 1, 2026 MASAHUDU ANKIILU
  • Oil cargo transfer operations at sea.

    Energy corridor halted: The Strait of Hormuz remains “practically closed,” disrupting a critical share of global oil and gas flows.

 

  • Trade losing momentum: Global merchandise trade is expected to slow sharply, from about 4.7% growth in 2025 to 1.5–2.5% in 2026.
  • Inflation pressures rising: Energy shocks are pushing up prices and increasing the cost of living.
  • Financial stress increasing: Investors are pulling back from developing countries, weakening currencies and raising borrowing costs.
  • High vulnerability: 4 billion people live in countries already spending more on debt than on health or education.

The Strait of Hormuz remains virtually closed, with effects spreading through the global economy within weeks by disrupting energy flows, raising prices and increasing financial pressure on developing countries, UN Trade and Development (UNCTAD) warns in its second rapid assessment. What began as a disruption in a key energy corridor is now feeding through the entire global economy.

The update follows an initial assessment issued on 10 March and confirms a rapid worsening of global conditions since the escalation at the end of February, with risks now extending well beyond energy markets.

A critical supply route is at a standstill

The Strait of Hormuz, a central artery for global energy trade, has seen activity fall to a near halt. Ship transits dropped from around 130 per day in February to just 6 in March – a collapse of about 95%.

The disruption is hitting a large share of global oil and gas supplies, with immediate consequences for production, trade and consumption worldwide. It is also spilling over into transport systems, including maritime routes, air cargo and port logistics.

Energy shock driving the global economy

Energy shocks have become the main channel through which the conflict is affecting trade and the global economy.

Fuel prices have risen sharply since the escalation on 28 February and remain elevated, while the cost of transporting oil has also increased significantly. These increases are feeding through supply chains, raising the cost of producing and moving goods across the world.

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.

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.

Trade and growth losing momentum

Trade started 2026 on a strong footing but is expected to lose momentum as the year progresses. Growth in global merchandise trade is projected to decelerate from about 4.7% in 2025 to between 1.5% and 2.5% in 2026, as global demand weakens and uncertainty rises.

The disruptions represent a major supply shock, pushing prices up while weighing on demand. Global growth is expected to slow from 2.9% in 2025 to 2.6% in 2026, assuming the conflict does not intensify further.

Rising geopolitical tensions are increasing uncertainty, making economic outcomes harder to predict and further weighing on investment and trade.

Rising uncertainty amplifies the shock

The conflict is adding to already high global geopolitical risks, amplifying its effects beyond energy markets.

Shipping and insurance costs are rising together, compounding the pressure. Inflation is picking up at the same time, adding to financial instability. The escalation is also laying bare underlying fragilities, including weak growth, rising inequality and higher living costs.

If the situation persists, disruptions to trade and financial markets could deepen, increasing the risk of a broader, cascading crisis.

Financial pressure building

The strain is also visible across financial markets.

As uncertainty rises, investors are shifting away from riskier assets, selling stocks, bonds and currencies in developing countries. The sell-off has been more pronounced than in advanced economies. This is typical in periods of heightened risk.

Currencies in developing countries have weakened, making imports such as fuel and food more expensive. At the same time, countries are facing higher costs to borrow on international markets, making it harder to raise capital when it is most needed.

Borrowing costs have risen across developing regions in the weeks since the escalation.

Developing countries are most exposed

The effects are most severe in developing economies.

Higher energy prices are increasing import costs, while weaker currencies amplify those pressures. At the same time, tighter financial conditions are reducing governments’ ability to respond.

The impact is compounded by rising import costs for energy, food and fertilizers, alongside weaker external demand. Even energy-exporting countries are unlikely to see clear gains, as higher import costs and increased volatility offset additional revenues.

In the most vulnerable economies, these pressures are also increasing risks to food security and complicating economic policy management.

These challenges come on top of existing debt vulnerabilities. Around 3.4 billion people live in countries that already spend more on servicing debt than on health or education, leaving little room to absorb new shocks.

A fast-moving global risk

Together, disrupted energy flows, rising prices, slower trade and tighter financial conditions are creating a broad-based global economic strain. As uncertainty rises, it is also weakening resilience and increasing the risk of a wider debt crisis.

If disruptions persist, the situation could evolve into a cascading crisis with far-reaching consequences for development..

African Eye Report

Sharing

Leave a Reply

*