The closure of the Strait of Hormuz following the escalating conflict between the United States and Iran has triggered a chain reaction across global markets, exposing the vulnerability of supply chains that depend on one of the world’s most critical maritime chokepoints.
When US President Donald Trump launched military strikes on Iran, Washington reportedly underestimated how quickly the conflict could disrupt global trade flows. Within days, Iran moved to close the narrow waterway linking the Persian Gulf to international markets, a passage normally carrying about one-fifth of the world’s oil shipments.
On March 2, the Islamic Revolutionary Guard Corps confirmed the closure of the strait, triggering an immediate surge in oil prices. Crude climbed from around $70 a barrel in late February to nearly $120 within ten days.
Yet economists say the real impact of the shutdown extends far beyond oil prices.
A choke point for the global economy
The Strait of Hormuz is not simply an oil corridor. It serves as the gateway for a vast array of energy and industrial inputs that power modern economies.
Tankers passing through the strait carry crude oil, liquefied natural gas (LNG), petrochemical feedstocks and fertiliser components that feed industries ranging from agriculture to aviation and electricity generation.
As shipments stall or reroute, disruptions are cascading across global supply chains, affecting production costs, trade routes and inflation worldwide.
Fertiliser supply under pressure
One of the first sectors to feel the shock has been agriculture.
Modern farming relies heavily on nitrogen-based fertilisers, which are produced using natural gas. Countries in the Gulf, particularly Qatar, supply a large share of global seaborne fertiliser exports.
The shutdown of the massive industrial complex at Ras Laffan Industrial City removed significant volumes of urea and ammonia from global markets almost overnight, pushing urea prices up roughly 35 per cent to three-year highs.
The timing could not be worse. March marks the beginning of spring planting in the Northern Hemisphere and preparations for the monsoon cropping season in South Asia.
Countries such as India rely on the Gulf for up to two-thirds of their nitrogen fertiliser imports, while Brazil depends on the region for about 40 per cent of its supply.
Higher fertiliser prices may force farmers to reduce usage, raising the risk of lower crop yields and higher global food prices later in the year.
Semiconductor supply risks
The technology sector could also feel the effects of the crisis through a lesser-known commodity: helium.
Helium plays a critical role in semiconductor manufacturing, where it is used in wafer cooling, leak detection and chip fabrication processes. There are a few viable substitutes in advanced chip production.
Qatar supplied nearly two-thirds of South Korea’s helium imports in 2025, and South Korean firms manufacture roughly two-thirds of the world’s memory chips.
Although chipmakers currently hold several months of helium stockpiles, analysts warn that prolonged supply disruptions could force manufacturers to scale back production. If the war continues into the second half of the year, companies may prioritise high-margin products such as AI server chips, while cutting production of consumer electronics components.
Industry forecasts already suggest global PC shipments could fall more than 11 per cent in 2026, while smartphone shipments may drop nearly 13 per cent.
Refinery adjustments and energy bottlenecks
Oil refineries across Asia face another challenge.
Many facilities in the region are configured to process the medium-sour crude grades produced in the Gulf. Alternative supplies such as US crude are lighter and require costly operational adjustments.
Even if the strait reopens soon, refineries that halted operations or relied on emergency reserves may need months to renegotiate supply contracts and adjust their processing systems.
The International Energy Agency estimates that more than three million barrels per day of refining capacity have already been affected by the disruption.
Insurance costs surge
Shipping costs have also surged.
War-risk insurance premiums for oil tankers have jumped sharply, rising from roughly $250,000 per voyage to as much as $1 million in some cases. Freight rates for tankers have also soared, while bunker fuel prices in major hubs such as Singapore have nearly doubled.
Analysts say the most significant change may be long-term. Insurers have now recalculated the risk of operating in the Gulf, meaning shipping costs could remain permanently higher even after the conflict ends.
From oil prices to grocery bills
Rising energy costs are quickly filtering through to consumer prices.
Historically, every $10 increase in oil prices pushes gasoline costs up by roughly 30 cents per gallon. With crude climbing about $40 above pre-war levels, fuel prices could rise by more than $1 per gallon in some markets.
Diesel prices, which underpin global transportation and logistics, have already jumped about 30 per cent in a month.
Since transportation costs are embedded in nearly every product, higher diesel prices tend to push up the price of food and other essentials worldwide.
Economists warn that sustained oil prices near $100 per barrel could push inflation higher in many economies.
Winners and losers
Not all countries are affected equally.
Energy exporters such as Russia, Norway and Canada are benefiting from higher prices and stronger demand for alternative supplies.
Meanwhile, major importers such as Japan, India and South Korea face mounting pressure on energy, fertiliser and industrial inputs.
For many developing nations, particularly in Africa and South Asia, the crisis could translate into higher food costs and worsening food security.
A risk of stagflation
Economists warn that the broad nature of the disruption raises the risk of stagflation—a combination of rising inflation and slowing economic growth.
Central banks typically respond to inflation by raising interest rates. But higher borrowing costs can further weaken growth, leaving policymakers with few easy solutions.
Historical comparisons are already being drawn with the oil shocks of 1973 and 1979, which triggered global recessions.
But analysts say the current crisis may be even broader. Unlike earlier shocks that primarily disrupted oil supply, the Hormuz closure is affecting crude, natural gas, fertilisers, chemicals and key technology inputs simultaneously.
As long as the world’s most strategic maritime chokepoint remains closed, the economic ripple effects are likely to continue spreading far beyond the Gulf.