The Impact of the Iran War and the Closure of the Strait of Hormuz on International Trade

Abstract

The Strait of Hormuz represents one of the most strategically important maritime chokepoints in the international trading system. Located between Iran and Oman, it connects the Persian Gulf with the Gulf of Oman and the Arabian Sea and constitutes a critical maritime route for international energy flows. Its importance extends beyond the transportation of oil and natural gas because disruptions in the Strait can affect shipping costs, insurance premiums, food and fertilizer markets, industrial supply chains, inflation, and the broader movement of international merchandise. UN Trade and Development has described the Strait as a critical global trade corridor, noting that approximately one quarter of global seaborne oil trade passes through it, together with substantial volumes of liquefied natural gas and fertilizers. 

The military conflict involving Iran and the resulting disruption of maritime traffic through the Strait have therefore generated consequences that extend well beyond the immediate geographical area. The reduction in commercial shipping has affected the movement of energy and other commodities and has increased uncertainty throughout international markets. UNCTAD reported that shipping transits through the Strait fell sharply during the disruption, while oil and gas prices, tanker freight rates, marine fuel costs, and war-risk insurance premiums increased. These developments illustrate how a disturbance in one maritime chokepoint can rapidly propagate through highly interconnected global supply chains. 

The economic importance of the Strait is particularly evident in energy trade. In 2024, approximately 20% of global liquefied natural gas trade transited the Strait, primarily involving exports from Qatar and the United Arab Emirates. In the first half of 2025, more than 20% of global LNG trade continued to pass through the waterway. Most of these flows were directed toward Asian markets, particularly China, India, Japan, and South Korea. Consequently, prolonged disruption can generate competition among importing regions for alternative energy supplies and place additional pressure on global energy prices.