Strait of Hormuz Crisis Deepens Global Supply Shortages
Three months after the closure of the Strait of Hormuz triggered the largest oil market disruption in history, global supply shortages are deepening, threatening jobs and economic growth worldwide as developing countries bear the brunt of the cascading crisis, according to a New York Times report published Wednesday.
The Scale of the Disruption
What began on February 28, 2026, when the United States and Israel launched coordinated airstrikes on Iran under “Operation Epic Fury,” has evolved into an unprecedented economic shock. Iran responded by effectively closing the Strait of Hormuz — a 34-kilometer-wide chokepoint through which roughly 20% of the world’s seaborne oil trade once flowed. Ship transits collapsed from approximately 130 per day in February to just six per day in March, a 95% decline, according to UNCTAD.
The World Bank confirmed in its Commodity Markets Outlook that the disruption represents the largest oil market shock in history, with global oil supply crashing by 10.1 million barrels per day in March. Brent crude surpassed $100 per barrel on March 8 and peaked at $126, recording the largest-ever monthly increase.
Economic Fallout Across the Globe
Global growth has slowed to 2.5% in 2026, well below pre-pandemic levels, according to the United Nations. Global merchandise trade growth is expected to decelerate sharply from 4.7% in 2025 to between 1.5% and 2.5% in 2026 as supply chains buckle under the strain.
The Federal Reserve Bank of Dallas estimates that a closure removing 20% of global oil supplies would lower global real GDP growth by an annualized 2.9 percentage points in the second quarter of 2026. If the disruption persists for three quarters, the Dallas Fed projects oil prices could reach $132 per barrel, with fourth-quarter-over-fourth-quarter global GDP growth falling by 1.3 percentage points.
Jobs and Livelihoods at Risk
The International Labour Organization has warned that the crisis is reshaping labour markets worldwide. “Beyond its human toll, the Middle East crisis is not a short-lived disruption. It is a slow-moving and potentially long-lasting shock that will gradually reshape labour markets,” said Sangheon Lee, ILO Chief Economist, as reported by UN News.
The ILO projects that global working hours could fall by 0.5% in 2026 and 1.1% in 2027, equivalent to 14 million and 38 million full-time jobs respectively. Real labour incomes could decline by as much as $3 trillion globally by 2027, with Asia-Pacific and Arab states among the most exposed regions.
Developing Nations Hit Hardest
Asia has been particularly vulnerable. The economic outlook for the region has deteriorated rapidly, driving inflation and weakening consumer confidence, according to the UN regional commission ESCAP. In Laos, inflation rose from 6.2% in February to more than 10% in April. Pakistan saw inflation jump from 7.3% to 10.9% over the same period.
Bangladesh, which relies on imports for roughly 95% of its energy needs, has experienced fuel shortages so severe they have sparked robberies, panic buying, and attacks on gas station workers. The Philippines declared a national emergency due to high oil prices, as 98% of its oil is imported from the Gulf. Myanmar has seen fuel prices triple since late February, with the World Food Programme warning that one in four people in the country are acutely food insecure.
Energy Rationing and Flight Cancellations
The crisis has triggered a wave of energy rationing across the globe. South Korean President Lee Jae Myung urged citizens to “save every drop of fuel,” implementing a fuel price cap and tax cuts. Australia’s Prime Minister Anthony Albanese asked citizens to use public transportation to conserve fuel for critical industries, as TIME Magazine reported. Thailand, Vietnam, and Indonesia have encouraged remote work for civil servants.
The aviation industry has been severely impacted. Jet fuel prices have more than doubled, with Ryanair CEO Michael O’Leary predicting summer flight cancellations of 5% to 10% if the strait remains closed. United Airlines CEO Scott Kirby warned of “tactically pruning flying that’s temporarily unprofitable” in the face of high oil prices.
What Comes Next
The World Bank’s baseline forecast assumes that the most acute phase of supply disruptions ends in May and that oil exports from the Middle East stabilize by the final quarter of 2026, with Brent averaging $86 per barrel. However, upside risks could push prices to between $95 and $115 per barrel if hostilities re-escalate or lasting impediments to regional oil flows persist.
Analysts warn that even after the strait reopens, the global economy will face lasting scars. The Dallas Fed model shows GDP remaining below pre-closure levels even after shipping resumes. The crisis has also exposed the fragility of global supply chains, with UNCTAD warning that 3.4 billion people live in countries already spending more on debt than on health or education — leaving little room to absorb further shocks.
As diplomatic efforts continue and the US Navy’s Operation Project Freedom remains paused, the world watches a slow-moving economic catastrophe unfold — one that, in the words of the ILO’s Sangheon Lee, will “gradually reshape labour markets” for years to come.