The global economy could begin feeling the effects of renewed disruption in the Strait of Hormuz within weeks, according to Fatih Birol, Executive Director of the International Energy Agency (IEA), as escalating conflict in the Middle East continues to threaten one of the world’s most important energy trade routes.
The warning comes as tanker traffic through the strategic waterway has stalled again, raising concerns over energy supplies, fuel prices and inflation.
Strait of Hormuz Traffic Halts as Regional Conflict Intensifies
The security situation in the Middle East has deteriorated significantly over the past week following attacks by Iran on commercial vessels transiting the Strait of Hormuz, including two supertankers operated by the Abu Dhabi National Oil Company. At the same time, the United States launched a series of strikes on Iran and reinstated a naval blockade aimed at preventing Iran-linked tankers from exporting oil.
After showing signs of recovery during the three weeks following the U.S.-Iran memorandum of understanding, tanker movements through the Strait of Hormuz fell sharply late last week, reaching their lowest daily levels in five weeks.
The earlier effort by Gulf oil producers to accelerate exports has also come to a halt, while oil prices have climbed approximately 13% since last Friday.
Markets Brace for Higher Energy Costs
Financial markets have begun pricing in the possibility of further disruption to global oil supplies, with economists and policymakers increasingly concerned that higher fuel prices could reignite inflationary pressures.
Oil, bond and equity markets have all reacted to the renewed geopolitical uncertainty as investors assess the potential impact of prolonged shipping disruptions.
IEA Chief Warns Time Is Running Out
Birol cautioned that governments have only a limited window to restore normal shipping conditions before the global economy begins to feel the consequences.
“If the Strait of Hormuz remains closed we may again have some difficulty for global economies, including those in the region and developing nations and Asia,” Birol told Bloomberg in an interview published on Thursday.
“It is not months, it is weeks” after which the strait needs to be “fully open, unconditionally open,” to spare the global economy from new challenges and slowdown, the head of the IEA said.
Fuel Markets Face Greater Pressure Than Crude Oil
Analysts note that the most immediate strain is emerging in refined fuel markets rather than crude oil itself, where supplies remain comparatively less constrained.
Meanwhile, Arsenio Dominguez, Secretary General of the International Maritime Organization (IMO), warned that shipping through the Strait of Hormuz has become too dangerous for many ship owners and operators, further increasing concerns over global energy transportation.