The Strait of Hormuz and the Global Economy
Disruptions in the Strait of Hormuz could increase logistics costs across a wide geographical area, particularly in Asia, while potentially slowing global trade volumes.
An aircraft of Asia's largest budget airline AIRASIA taxis on the runway, at the Ninoy Aquino International Airport, in Pasay City, Metro Manila, Philippines, on April 14, 2026. Photo by Anadolu Images.
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eopolitical tensions centered around the Strait of Hormuz, one of the most critical chokepoints for the global energy supply, amid the US/Israel-Iran conflict, are having multifaceted effects on the world economy. The intermittent opening and closing of the strait intensifies these effects, creating additional uncertainty. The war-related crisis is putting upward pressure on energy prices by increasing the risk to oil and natural gas supplies, while also carrying the potential to disrupt global inflation dynamics.
Rising energy costs increase production costs, particularly in energy-importing countries, while negatively affecting industrial production and trade balances. Ultimately, the war is leading to downward revisions in global growth expectations. Consequently, a sustained rise in energy prices would constrain not only production costs, but also household disposable income, thereby tightening demand.
The crisis is spreading not only through energy prices, but also via trade routes, supply chains (particularly for food), and financial markets. Disruptions in the Strait of Hormuz could increase logistics costs across a wide geographical area, particularly in Asia, while potentially slowing global trade volumes. Rising geopolitical uncertainty is dampening investment appetite and increasing volatility in financial markets. The strengthening of risk-aversion trends, in particular, is causing fluctuations in capital flows to emerging economies. This creates additional vulnerability through exchange rates and financing costs. In this context, should the crisis persist, the risk of “stagflation”, where both inflationary pressures and growth losses are observed simultaneously, could intensify.
A massive, historic shock to the global oil supply
The closure of the Strait of Hormuz due to the US-Israel/Iran conflict has already caused a massive, historic shock to the global oil supply. According to analyses based on research by the Federal Reserve Bank of Dallas, this closure is equivalent to removing approximately 20 percent of the global oil supply from the market. This is three to five times greater than previous supply shocks, such as the 1973 oil crisis, the Iranian revolution of 1979, and the Gulf War of 1990. The resulting supply crunch is prompting oil-importing nations to seek alternative sources while exerting strong upward pressure on global oil prices. It is also bringing debates about energy security back to the forefront of the global agenda.
According to these analyses, oil prices are expected to rise to approximately $98 per barrel in the quarter in which the lockdown takes place, and global real GDP growth is projected to contract by 2.9 percentage points on an annualized basis. If the financial and geopolitical shock caused by the war persists and the lockdown is extended, oil prices could rise to the $115–$132 range, and the negative impact on growth could spread across the entire year. If the lockdown is short-lived, a decline in oil prices and a partial recovery in growth may be observed. However, the main scenario suggests that global income levels will remain below their initial trend due to the lasting effects of production losses. This situation shows that supply shocks can disrupt medium-term growth dynamics beyond temporary fluctuations.
Furthermore, it is evident that actual supply disruptions and expectations of geopolitical risks strongly influence prices and economic activity. Increased stockpiling behavior driven by these expectations heightens price volatility. Meanwhile, the rapid depletion of stocks in the event of a disruption further exacerbates supply pressures. In this context, uncertainty in energy markets is a significant accelerator of economic contraction.
Türkiye’s role as an alternative to Hormuz: The middle corridor and the development route
Due to the depth of Türkiye’s economic presence in the region, it is inevitable that the country will be affected by the conflict. Considering the $65 oil price assumption in the Medium-Term Program, a permanent shift to the $100 range could cause significant deviations in macroeconomic balances. In this scenario, Türkiye’s annual energy import costs are estimated to rise by $10–15 billion, and the current account deficit-to-GDP ratio could increase by one percentage point.
Furthermore, an increase in the budget deficit and a slowdown in growth are anticipated. At this juncture, Türkiye’s reserve position emerges as the most critical buffer for the economy. The recent rise in gross reserves to the $170 billion range has increased the capacity to withstand external shocks. However, should the war persist, a sustained rise in energy prices will continue to put upward pressure on Türkiye’s current account balance and inflation trajectory, even with a strong reserve buffer
New initiatives to mitigate the effects of the war are also on the agenda. Mitigating the impact of the supply shock on the global economy largely depends on deploying alternative logistics and energy routes. Options include Saudi Arabia redirecting trade via Yanbu Port to the Red Sea, the United Arab Emirates bypassing the Strait of Hormuz via Fujairah Port, and securing limited transit through bilateral agreements, which could partially reduce the supply shortfall. However, due to security risks and capacity constraints, these alternatives do not appear feasible in the short term to fully compensate for the global supply shortfall.
This highlights the critical importance of geographical diversification for energy supply security. In this context, the Türkiye-centered “Middle Corridor” has been highlighted in the international press as one of the leading alternatives. In this context, the Türkiye-centered “Middle Corridor” has been highlighted in the international press as one of the leading options. Stretching from Asia to Europe via the Caspian Sea and the Caucasus, this corridor is attracting attention because it offers shorter transit times and lower geopolitical fragility than sea routes.
Türkiye and the Middle Corridor
As the Middle Corridor grows stronger, Türkiye is establishing itself not only as a transit hub, but also as a strategic center directing trade and energy flows. According to analyses by the Financial Times, when combined with existing energy pipelines and logistics infrastructure, this route could form a realistic alternative capable of reducing dependence on the Strait of Hormuz. Increasing the corridor’s transport capacity, streamlining customs and logistics processes, and deepening regional integration could significantly enhance Türkiye’s role in global supply chains. Within this framework, the Development Corridor project is also gaining prominence in the economic equation.
Spanning approximately 1,200 kilometers from the Persian Gulf through Iraq to Türkiye and on to Europe, this new corridor could offer time and cost advantages in global trade by serving as an alternative to the Suez Canal. Asia–Europe shipments that currently take one and a half months by sea could be reduced to under 25 days via this route, transforming Türkiye’s position as a transit country into a structural advantage. With an estimated total investment of between 15 and 20 billion dollars and a multimodal structure including rail and road transport, the Development Corridor is one of two main axes—alongside the Middle Corridor—strengthening Türkiye’s geo-economic backbone.
Consequently, while a potential crisis centered on the Strait of Hormuz could severely disrupt global energy and trade flows, the resulting uncertainty is accelerating Türkiye’s search for alternative logistics routes and corridors. Nearly 20 percent of global energy trade passes through the Strait of Hormuz, so any disruption would trigger price shocks and necessitate route diversification. In this context, projects such as the Development Corridor and the Middle Corridor enhance Türkiye’s ability to convert its geographical advantage into economic gains. Although risks remain high in the short term, Türkiye’s ability to implement this new logistics architecture in the medium and long term provides flexibility during this period of global trade reshaping.
(Originally published in Turkish by Kriter)
