When Chokepoints Break the Global Village: Geopolitical Supply Shocks, Institutional Resilience, and the Divergent Fates of the UAE and Pakistan

Abstract

The Iran‑Israel war (2024) and the Red Sea crisis (2023–2025) have simultaneously disrupted two critical maritime chokepoints: the Strait of Hormuz and Bab el‑Mandeb. Using quarterly data for the United Arab Emirates (UAE, 2017‑2026) and comparable data for Pakistan, this study employs Generalised Method of Moments (GMM), quantile regression, and Vector Autoregression (VAR) with impulse response functions. The UAE’s GMM coefficient of the supply shock is +0.0235 (p>0.9) and its VAR impulse response never exceeds +0.0033 percentage points – the shock is effectively neutralised. Pakistan’s GMM coefficient is –1.6356 (p<0.001) and the first‑quarter impulse response is –6.0 percentage points. The divergence is explained by the three pillars of cross‑continental development: infrastructure (Logistics Performance Index, 4.0 vs. 2.6), institutional quality (Rule of Law Index, 0.68 vs. 0.38) and manageable political friction. A composite institutional‑strength z‑score places the UAE in the top‑right quadrant (high strength, negligible impact) and Pakistan in the bottom‑left quadrant (low strength, large negative impact). These results confirm that economic effects are borderless, but resilience is not. Policy implications include global chokepoint governance and targeted institutional reforms in vulnerable economies.