The disruption of the flow of goods due to the Iran conflict once again highlights the tight integration of the global economy.
The Hormuz Strait is a vital shipping artery for a wide range of goods.
Where do we stand now? The World Bank’s Commodity Markets Outlook report, published on 28 April, detailed the scale of the impact: disruption to the supply of several essential commodities.
The crisis also underscores a key reality: the global economy is not driven only by intangible factors. Behind artificial intelligence, renewable energy, and digital services lies a massive physical base—from resources and energy to supply chains—as noted by British author Ed Conway in his book The Material World.
Thus, when the flow of essential goods is disrupted, negative impacts spread quickly. According to the World Bank, closing the Hormuz Strait reduced global oil supply by about 10.1 million barrels per day in March, larger than historic shocks such as the 1979 Iranian Revolution, the 1973 oil embargo, the 1990 Kuwait crisis, or the 1980s Iran–Iraq War. The direct cause was the reduction of tanker traffic through the strait from about 60 ships per day to nearly zero after 5 March.
The result was a sharp rise in energy prices. In March,
oil prices rose by $46 per barrel, the strongest month-on-month increase in decades. By 20 April, jet
fuel prices in Singapore had doubled, urea prices were up 85%, LNG prices in Asia were up 46%, and Brent crude was up 32% since the conflict began.
In this context, the big question is how much of the supply shortfall can be offset. The World Bank estimates that of an estimated total shortfall of about 20 million barrels per day, only part can be substituted: about 1.5 million bpd from other OPEC producers, 5.5 million bpd via alternative pipeline routes, 3.3 million bpd from stockpiles, 3.9 million bpd from oil currently under sanctions, and about 1 million bpd from other sources (including biofuels and production from high-income economies). Even in this scenario, the
market would still be short by roughly 4.6 million bpd, more than 4% of global demand. Notably, drawing down inventories is only a temporary solution. As stocks run down, the shortfall could rise to nearly 8% of global consumption, intensifying pressure on energy markets.
The decline in oil supply in 2026 is the largest since 1973.
The initial losses in supply due to the disruption (million bpd).
The second question — and more importantly — is how long the closure of the Hormuz Strait will last and how long it will take the market to return to normal. Iranian leaders remain divided on possible concessions, particularly regarding their nuclear program. It is clear that owning nuclear weapons is viewed as a security bolster. Meanwhile, President Trump has repeatedly shifted objectives. Some ideas, such as creating a “Hormuz Strait Protection Company” to levy fees on vessels and share the revenue between the US and Iran, were mentioned as political rather than practical options.
In the base case, the World Bank assumes the most severe disruption ends in May. After that, traffic through the strait will gradually recover and return to pre-war levels in the fourth quarter.
Under this assumption, the global energy price index could rise by about 24% this year. Fertilizer prices are expected to rise by 31%, with urea up as much as 60%. Food prices, however, are projected to increase only about 2% thanks to large inventories from 2025. The outlook for next year is harder, especially if disruption persists.
Risks lean toward higher prices. The World Bank projects the average oil price for this year at around $86 per barrel, in line with futures expectations. However, if disruption lasts longer and the extent of damage is greater, oil could rise to around $115 per barrel or higher, with spillovers into the following year.
What is the conclusion? First, the global economy is tightly linked and particularly vulnerable to shocks from unpredictable factors. Second, even if disruption cannot be fully avoided, there is a clear need for precautionary measures against fossil-fuel supply shocks, which strengthens the case for accelerated transition to renewable energy and nuclear power. Third, the role of the US as a reliable partner is being questioned — not only in trade or relations with NATO allies but also as an energy supplier. Fourth, this is a major shock with the heaviest impact on poorer and more vulnerable nations. Higher oil and fertilizer prices will worsen economic pressures, underscoring the need for international assistance. Fifth, central banks will face the challenge of controlling inflation while limiting adverse effects on growth, though maintaining inflation expectations remains a top priority. Finally, the global economy will adjust. The speed and extent of adjustment depend on how quickly the blockade ends. The only favorable note is that both Trump and Iran have strong incentives to end the conflict: people, economies, and their allies need it. Will they do so? Hopeful signs exist.
*The article reflects the views of Martin Wolf in the Financial Times*
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- 13:00 30/04/2026
