The resumption of traffic through the Strait of Hormuz marks a significant moment for global trade and energy supplies after more than 100 days of severe disruption. This development provides immediate relief to many economies by enabling shipping routes to normalize, according to a new report by the United Nations Conference on Trade and Development. But the blockade’s impact is a heavy burden for the world’s most vulnerable nations.
The Strait of Hormuz is a crucial choke point for roughly a quarter of the world’s seaborne oil trade, as well as substantial volumes of liquefied natural gas and fertilizers. Earlier in the year, disruptions caused energy and input costs to spike, creating ripple effects across supply chains around the world. Traffic flows have begun to reopen; the recovery will be uneven.
The brunt of the oil and fertilizer price shocks had to be borne by vulnerable economies, especially least developed countries and small island developing states. Those gains have driven persistent inflation, squeezing household budgets and driving up the cost of everyday necessities like food and health care. The pressures are felt the most by the poor, with limited fiscal space limiting the ability of governments to provide support. “The reopening provides the path for recovery. But for vulnerable economies, the path can be longer, bumpy and expensive. “International support is needed to enhance their capacity to cope,” stresses the UNCTAD report.
Most of these countries are highly dependent on oil and cereal imports. The data in the report shows that dozens of least developed countries and small island states are doubly exposed, with net imports accounting for large shares of their GDP. For instance, countries like Yemen, Kiribati and a number of Pacific island states depend on such imports to meet their basic needs. The combination of higher transport costs and agricultural input prices has increased pressure, sparking concerns about food production and security.
“International energy prices can adjust fairly quickly, but shipping routes and value chains need more time to fully adapt,” experts say. Fertilizer shortages and high prices may persist, especially as a strong El Niño event is likely to place additional stress on global food systems. History tells us that price spikes, even if temporary, can have long-term effects. This can include higher child malnutrition and slower economic growth.
In many of the affected countries, public finances are already under strain. Their ability to absorb these shocks is constrained by challenges such as heavy debt burdens, lower remittances, and a decrease in international aid. The volatility of exchange rates imposes an additional burden on economies servicing external debt.
United Nations Secretary-General António Guterres issued a direct appeal, underlining what is at stake: “These shocks will be felt for many months – and developing countries will bear the heaviest impacts. “I call on all sides to respect the ceasefire and to redouble their efforts.”
The report highlights a number of important policy considerations. It will take time for trade flows to return to normal. Energy shocks will continue to impact countries differently, with oil-import-dependent countries facing strong domestic inflationary pressures. Risks to food production remain, as input costs remain higher. International support is still there and investments in resilience measures, such as diversifying sources of trade, could help to build buffers against future disruptions.
As the world turns to recovery, the UNCTAD analysis is a reminder that headline improvements in energy markets do not automatically translate into relief on the ground for millions of people in developing countries. The extent to which the recovery is more inclusive, or further disadvantages the most exposed economies, will depend on concerted action on debt, aid flows and supply chain vulnerabilities.
The episode illustrates the interconnectedness of global trade routes and how the most vulnerable pay the highest price. Looking ahead, economic resilience in vulnerable areas could be as important as solving the short-term crises.