UN Trade and Development (Unctad) says military escalation in the region of the Strait of Hormuz, in the Middle East, has disrupted shipping flows through this narrow passage, which raises concerns about ripple effects across energy markets, maritime transport and global supply chains.

The Strait of Hormuz is one of the world’s most critical maritime choke-points and trade corridors. It carries about one-quarter of global seaborne oil trade and significant volumes of liquefied natural gas and fertilisers.

It links the Arabian Gulf to the Gulf of Oman and sits between Oman, the United Arab Emirates and Iran.

Brent crude prices have risen sharply since the US and Israel launched military action on Iran at the end of February, prompting retaliatory actions across the Middle East by Iran. Iran has also threatened to halt all shipping through the Strait of Hormuz.

Higher energy, fertiliser 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 says.

Disruptions in energy, transport and agricultural inputs often propagate across interconnected markets.

This shock comes at a time when many developing economies struggle to service their debt and face a tightening of fiscal space and limited capacity to absorb new price shocks, Unctad says in the 'Strait of Hormuz Disruptions – Implications for Global Trade and Development' analysis.

Further, while the overall global economic impacts will depend on the duration and scale of the disruption, the situation highlights the importance of continued monitoring, particularly implications for vulnerable economies.

The total number of daily ship transits through Strait of Hormuz has dropped by 97% from an average of 129 a day to four ships a day.

Additionally, the disruptions in the Strait compromise energy supplies, particularly to Asia.

The disruption in the Strait of Hormuz underscores the vulnerability of critical maritime choke-points to geopolitical tensions and their potential to transmit shocks across supply chains and commodity markets, the UN agency says.

Reducing risks to global trade and development, including environmental risks, requires de-escalation and safeguarding maritime transport, ports and seafarers and other civilian infrastructure, while maintaining secure trade corridors in line with international law and freedom of navigation.

Additionally, the regional and global economic impacts will depend on the duration, intensity and geographic scope of the tensions. Continued monitoring is essential to assess evolving risks and their potential impacts, it recommends.

Rising energy, transport and food costs could strain public finances in developing countries and increase pressure on household budgets, thereby potentially heightening economic and social pressures and complicating progress toward sustainable development, particularly in economies heavily dependent on imported energy, fertilisers and staple foods.