Introduction

The Strait of Hormuz is one of the most critical chokepoints in global trade, facilitating the transit of more than 20% of the world’s crude oil supply and significant quantities of liquefied natural gas (LNG). This research paper empirically examines the economic and financial consequences of disruptions to maritime traffic in this strategic waterway, particularly following the conflict in the Middle East that commenced in late February 2026. The war resulted in a near-complete halt in vessel traffic, triggering what the International Energy Agency described as the largest energy crisis the world has ever faced. The analysis investigates how such disruptions affect commodity prices, global economic activity, and financial conditions.

Data and methodology

The analysis relies on the IMF/University of Oxford Portwatch database, a real-time maritime monitoring system that tracks vessel movements through major chokepoints using GPS and Automatic Identification System (AIS) signals. The study focuses on the 12 busiest chokepoints worldwide, compiled since 2019. To extract supply-driven traffic shocks, the methodology involves decomposing daily traffic data into deviations from historical norms, controlling for vessel tonnage. These shocks are further isolated using externally identified global oil supply shocks from existing literature to distinguish between supply-driven and demand-driven fluctuations. This approach ensures the findings reflect actual constraints on maritime flows rather than broader changes in global demand.

Regression specifications

The study utilizes Local Projection (LP) regressions to estimate the impact of traffic disruptions over a 12-month horizon. The first margin considered is the effect on real commodity prices, specifically energy and fertilisers. Second, the research examines global industrial production growth and consumer price index (CPI) inflation. Finally, the analysis investigates financial spillovers by focusing on yield spreads for USD-denominated investment-grade and high-yield corporate bonds, as well as the Emerging Markets Bond Index (EMBI). Quantile regression models are also employed to assess how disruptions disproportionately affect the tails of the distribution for inflation and credit spreads.

Chokepoints around the world

Nine of the 12 busiest chokepoints are located in or border the Asian continent. The Strait of Hormuz is unique among these; traffic is overwhelmingly dominated by tankers moving oil and gas, accounting for 60-70% of its total maritime traffic compared to 40% or less at other locations. Stylised facts indicate that while traffic at several chokepoints has increased over time due to globalisation, the conflict in early 2024 caused significant depressions in the Strait of Bab el-Mandeb and the Suez Canal. However, the halt in Hormuz traffic starting in March 2026 is unprecedented, with traffic shocks falling by a cumulative four standard deviations from their pre-conflict levels.

Empirical analysis

Negative shocks to traffic in the Strait of Hormuz lead to significant increases in the real prices of energy and fertilisers. Estimates suggest energy and fertiliser prices are approximately 4% higher relative to global CPI six months after a standardized reduction in traffic, rising to 8% and 6% respectively after 12 months. For supply-driven reductions, the impacts are nearly double, with real prices increasing by 15-17% after one year. Quantile analysis shows that these shocks push the right tail of the energy inflation distribution further out, primarily adding to upside risks when inflation is already elevated.

Regarding global activity, a standardized fall in maritime traffic is typically associated with a 1.5% reduction in global industrial production and a 1% increase in global consumer prices after 12 months. The Strait of Hormuz is the only chokepoint among the 12 busiest that consistently acts as a proxy for global supply conditions. Financial conditions also tighten significantly; a standardized drop in traffic is followed by increases in USD high-yield corporate bond spreads of approximately 50 basis points. EMBI spreads for emerging market sovereign bonds widen by 20-30 basis points. These financial shocks act as amplifiers, widening spreads more significantly when market conditions are already stressed.

Conclusion

The Strait of Hormuz serves as a vital barometer for global supply conditions, and its disruption acts as a significant stagflationary force. While other chokepoints like the Strait of Malacca and the Strait of Gibraltar show localised impacts, their influence is neither as consistent nor as global as that of Hormuz. The research highlights that traffic disruptions disproportionately affect the upper tails of inflation and financial spread distributions. These findings underscore the critical importance of the Strait of Hormuz for global financial stability and suggest that chokepoint risks require continued vigilance and further research into global energy security and trade vulnerabilities.