The Strait of Hormuz, the most critical chokepoint in the global energy trade through which roughly 20% of the world's oil supply transited daily before the conflict, has seen commercial tanker traffic virtually halted due to threats of Iranian sea mines and missile attacks. This closure has not only choked off a quarter of global seaborne oil trade but also significant volumes of LNG and fertilizers, creating immediate and profound economic shocks worldwide.
Oil prices have at points soared to close to $120 a barrel due to the conflict and closure, with overall energy and fertilizer costs surging dramatically. Since late February, oil prices have risen by around 45%, gas by 55%, and fertilizer prices by 35%. Global merchandise trade growth is forecast to slow sharply to 1.9% in 2026 from 4.6% in 2025, according to the 'Global Trade Outlook and Statistics', reflecting the broader slowdown triggered by the disruption.
The fertilizer supply chain faces a particular crisis, as around one-third of the world's fertilizer exports normally pass through the Strait of Hormuz. QatarEnergy halted output at the world's largest urea plant after shutting down gas output following an attack, severely constraining global supply. Urea export prices from the Middle East have surged by about 40%, rising to a little more than $700 per metric tonne, placing immense pressure on agricultural sectors dependent on these inputs. This production halt and price surge threaten to exacerbate food insecurity, especially in regions reliant on imported fertilizers.
Global ripple effects are already evident, with the world potentially heading towards not only an energy shock but a food crisis, with worst ramifications in the global south. In East Africa, shipping routes for Tanzanian avocados are blocked due to the conflict, and air freight capacity is down significantly, while warehouses in Mombasa, Kenya, are filling up with tea that would normally be exported to the Gulf and other markets. In Sri Lanka, authorities have introduced fuel rationing, cut back public events, and shifted schools to a four-day week in response to the economic strain. These specific country impacts highlight how the disruption is cascading through vulnerable economies, disrupting both exports and domestic stability.
Major energy importers like China are acutely exposed, given its estimated daily consumption of 15 to 16 million barrels of oil, with Gulf countries accounting for a major source of imports. Russian oil accounts for nearly a fifth of China's energy imports, making Moscow its biggest oil supplier, but the closure of the Strait complicates alternative sourcing and logistics. The reliance on Gulf oil means China must navigate heightened supply uncertainties and potential price volatility, which could strain its economic planning and energy security strategies.
Europe's energy vulnerability is amplified by its current gas storage levels, which are below 30%, a five-year low, and need to inject nearly 60 billion cubic meters to meet EU regulations of 90% capacity by December. This low storage, combined with the disruption to LNG shipments through the Strait, raises concerns about winter supply adequacy and potential price spikes. The European Union faces urgent challenges in securing alternative gas sources and managing demand to avoid shortages, as the conflict prolongs energy market instability.
Broader economic forecasts have been downgraded, with a scenario of elevated crude oil and LNG prices throughout 2026 projected to shave 0.3 percentage points off GDP forecast for 2026 and slash 0.5 percentage points off trade forecast. The global economy grew by 3% in 2025 despite geopolitical and trade policy turmoil, but the outlook is now uncertain due to the Strait closure and its ripple effects. These downgrades reflect the compounding impact of energy price shocks on inflation, consumer spending, and industrial output across multiple regions.
Swedish exports to the Middle East and North Africa, which totaled SEK 65 billion in 2025 representing just over 3% of Sweden's total exports, face heightened challenges. The conditions for Swedish exports have become more demanding in 2026 due to the conflict in the Middle East, increased uncertainty around trade policy, and tougher global competition. Swedish companies also encounter customs compliance challenges such as misclassification of HTS codes and insufficient documentation, complicating trade flows amid the disruption. Business Sweden, a semi-governmental industry organization, provides analysis on these export dynamics, highlighting how even smaller trade partners are affected by the regional instability.
Amid the turmoil, some positive regional developments persist, with the UAE placing 21st worldwide and first in the Arab region in the World Happiness Report 2026. Saudi Arabia moved up to 22nd place in the latest World Happiness Report, rising 15 spots from the previous edition, indicating improvements in well-being metrics despite the broader geopolitical tensions. These rankings suggest that domestic policies and social factors in these Gulf states continue to advance, even as the conflict disrupts regional and global economies.
In unrelated sports news, Mohamed Salah will leave Liverpool FC at the end of the 2025-26 season, with Liverpool FC confirming a mutual agreement for his departure that will see his contract concluded a year early, making him a free agent. During his time at Liverpool, Salah scored more than 250 goals in over 420 appearances, helped secure two Premier League titles, a Champions League crown, and multiple domestic trophies, cementing his legacy at the club.
Key unknowns remain, including what specific measures are being taken to reopen or secure the Strait of Hormuz for safe passage and how long the disruption to global energy and fertilizer supplies is expected to last. The exact casualty figures or military details of the conflict causing the Strait closure, along with which countries or entities are directly involved, have not been publicly confirmed. Additionally, it is unclear what immediate relief or alternative supply routes are being established for affected countries like Sri Lanka, Tanzania, and Kenya, leaving their economies in a precarious state as the crisis unfolds.