Economic Shockwaves of a Strait of Hormuz Blockade: Global Financial Crisis and Energy Market Disruptions

Abstract

The Strait of Hormuz is among the most important maritime chokepoints in the global economy due to the volume of oil, petroleum products and liquefied natural gas that is internationally traded through it being extremely large. According to recent estimates, in 2024 and the first half of 2025, over a quarter of all seaborne oil was transited the strait and approximately one-fifth of all oil and petroleum liquids world consumption was also transitted the strait with about one-fifth of all world liquefied natural gas also traversed the strait. Hormuz has a strategic value which goes beyond mere geometry of transportation. It is the dominant route to export of a number of the largest producers in the Gulf and a lengthy closure would also render out of reach the vast majority of the efficient spare oil manufacturing capability in the world. That is why a blockade of the strait would not be a regional maritime issue anymore. It would most likely spread quickly across the global economy through energy prices, the cost of shipping, inflation, balance of trade, fiscal stress and financial-market volatility. The current paper employs qualitative research design relying on the studies of the institutional reports and the policy analysis in order to investigate the possibility of a massive macroeconomic and financial turmoil caused by a blockade of the Strait of Hormuz. Basing on the materials by the U.S. Energy Information Administration, International Energy Agency, International Monetary Fund, Bank for international Settlement, European central bank, OECD, world bank, and unctad, the paper will contend that there are probably five key channels through which the economic shock would propagate: hydrocarbon supply interruption, shipping and insurance dislocation, inflation pass-through, external-sector deterioration among energy importers and financial contagion. According to the existing literature, there is a consistent suggestion of stagflationary results of major energy shocks, reducing output and increasing inflation, and these results are more dangerous when they happen in the conditions of tight monetary policy, high levels of debt and weak sovereign or external balances. The paper concludes that long-term Hormuz blockade might even become a global financial crisis in case it occurred under a combination of already high levels of inflation, fiscal burdens and market panic. Although the immediate loss of oil and LNG flows is also the biggest threat, the interplay of scarcity of commodities, inflation expectations, monetary-policy constraint, sovereign vulnerability, and investor confidence is also a threat. The Strait of Hormuz is to be perceived in that sense as a strategic base of waterways but also a macro-financial center of susceptibility of the world political enforcement of the macro-financial system.