Shipping Collapses in the Strait of Hormuz – Consequences.
With the rapidly changing situation surrounding the US–Israel–Iran conflict, we would like to provide a clear overview of the current developments.
Iran has decided to close the Strait of Hormuz, a vital trade artery through which roughly 20% of global oil supply passes. The impact extends far beyond energy markets and will affect global trade and consumer goods due to the strong correlation with energy costs.
Energy Markets
In the first instance, energy prices are spiking.
Crude oil prices have risen sharply. Markets reacted immediately:
Brent Blend, the leading global oil benchmark for Europe, Africa and the Middle East, jumped up to 13%.
European gas prices surged more than 39% in a single day.
These increases will place significant cost pressure on global economies, making consumer goods and commodities more expensive due to higher fuel, transport and production costs.
Natural Gas / LNG: Qatar, the world’s second-largest LNG exporter responsible for roughly 20% of global supply, has suspended operations until safety conditions improve.
Seafreight
Maritime transport has entered a state of emergency.
More than 150 vessels are currently stranded or anchored in safe zones. US President Donald Trump has suggested that the United States could intervene to support shipping insurance.
Major global shipping lines — Maersk, MSC, Hapag-Lloyd and COSCO — have suspended traffic in the region, effectively freezing shipping flows between Asia and the Middle East.
Maritime insurance is becoming a critical barrier to further trade. Major insurers such as Skuld, NorthStandard and Gard are cancelling war-risk coverage for vessels transiting the conflict zone. Premiums have surged from roughly 0.2% to around 1%, making operations economically unviable for many companies.
As commercial vessels are legally required to maintain insurance coverage, this may lead to a further shutdown of maritime trade routes.
Freight rates are already spiking globally, with air freight prices also rising rapidly.
Food Supply
The disruption is expected to impact global food markets.
Shortages of fertilizers such as sulphur, nitrogen and ammonia may emerge, as the Middle East is an important supplier.
This could lead to higher global food prices, particularly for wheat, corn, dairy and seafood.
Lower crop yields and potential quality issues may further intensify price pressures.
In general, food prices are strongly correlated with energy costs, meaning higher energy prices will directly translate into higher food prices worldwide.
Metals
Supply chain disruptions will also impact industrial metals.
Europe is already facing aluminium supply deficits, pushing premiums significantly higher in Rotterdam, the US Midwest and Japan.
Geopolitical Impact
The situation may accelerate broader geopolitical shifts in global trade.
The Middle East is expected to further strengthen the BRICS bloc (Brazil, Russia, India, China, South Africa ) with recent additions as Saudi Arabia and Argentina; which gives them more leverage in global financial reform. However, to maintain unity in this heterogenous group will be challenging.
China continues to expand its strategic position in global trade, redefining export routes and target markets.
While labour-intensive production remains concentrated in Southeast Asia, China is increasing exports of intermediate goods and investing heavily in global logistics infrastructure.
A recent example is the Port of Chancay in Peru, developed with Chinese investment, which creates a direct trade connection between East Asia and South America.
Strategic trade perspective
In the coming weeks, the key question will not only be how long the Strait remains closed, but how quickly global trade can adapt. Supply chains tend to reorganize rapidly under pressure, yet the scale of this disruption — touching energy, shipping, insurance and commodities simultaneously — may lead to longer-term adjustments in trade routes, sourcing strategies and pricing structures.
