Hormuz Crisis Threatens to Slash Global Growth to 1.8 Percent
The war that erupted on February 28 between the U.S., Israel, and Iran has effectively brought commercial maritime traffic through the strait to a standstill, with Tehran halting shipping lanes in direct retaliation for the pre-emptive assault. The consequences have cascaded across global commodity markets: roughly 20% of worldwide oil and liquefied natural gas trade, 30% of fertilizer flows, 40% of urea supply, 50% of sulfur trade, and 30% of phosphate shipments have all been disrupted.
The supply-demand imbalance in energy markets is stark. Global daily oil consumption reached 104 million barrels in April, while supply languished at just 95.1 million barrels — a shortfall deepened by a daily production loss of 14.4 million barrels from Gulf producers compared to pre-war levels, according to the International Energy Agency. Brent crude is currently trading 30% above pre-war levels, while European gas prices have surged 50% on supply constraints. Ship fuel costs have spiked 59% over the same period, according to the World Maritime Council.
The Organization for Economic Cooperation and Development (OECD) laid out two starkly divergent paths in its latest Economic Outlook report. Under a short-lived disruption scenario, global growth would decelerate from 3.4% in 2025 to 2.8% in 2026, before partially recovering to 3.1% in 2027. Should the conflict and trade disruptions prove prolonged, however, global growth could collapse to as low as 2.1% this year and erode further to 1.8% in 2027. A 0.6 percentage point contraction alone translates to a potential economic loss of at least $700 billion, given the global economy's current valuation of approximately $118 trillion.
Credit rating agency Fitch Ratings moved independently to cut its 2026 global growth forecast by 0.2 percentage points to 2.4%, directly citing the oil crisis triggered by the war. Fitch also projected the Strait of Hormuz — closed for 14 weeks — would remain shut until at least July, with oil markets expected to tighten further over the coming two months as inventories continue to drain.
The World Trade Organization projected global trade growth would contract to 1.9% this year following a robust 4.6% expansion in 2025, before a modest recovery to 2.6% in 2027. The OECD separately forecast global trade growth falling from 5% in 2025 to 3.1% in 2026 and 2.9% in 2027, with the second and third quarters of 2026 bearing the sharpest contraction due to collapsed trade with Gulf economies and soaring energy and logistics costs.
The UN Conference on Trade and Development (UNCTAD) projected global growth slowing to 2.6% in 2026, cautioning that the world economy is entering a period of heightened fragility.
The human cost of the crisis falls most heavily on the world's poorest economies. Of the 75 countries identified as most vulnerable to the current shocks, 65 are net oil importers — collectively home to one billion people, with more than 30% surviving on under $3 per day. At current import levels, the surge in oil prices could add in excess of $20 billion annually to the combined fuel import bills of these economies, according to UNCTAD.
One countervailing force has provided partial insulation against the worst outcomes: surging global investment in artificial intelligence is generating stronger-than-expected upward momentum in technology trade, supporting exports from Asian economies and partially offsetting energy-driven headwinds across global growth and trade metrics.
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