Strait of Hormuz Crisis: A Looming Threat to the Global Economy

The Strait of Hormuz, a critical chokepoint for global energy and trade, is currently experiencing significant disruption following joint military actions by the United States and Israel in Iran on February 28, 2026, which resulted in the death of Iran’s supreme leader, Ali Khamenei [1]. Iran has responded with retaliatory missile and drone attacks, escalating tensions and creating a volatile situation with far-reaching economic consequences. Approximately 21 million barrels of oil and roughly 20% of global liquefied natural gas (LNG) transit this vital waterway daily [2]. A prolonged interruption to this flow poses a substantial risk to the world economy.

The Immediate Impact: Oil Prices and Market Volatility

Conflicts typically trigger initial market volatility, with rising oil prices and increased risk premiums as investors seek safe-haven assets. Though, the Strait of Hormuz situation transcends typical market fluctuations due to its central role in energy trade. Analysts estimate that a sustained disruption could push oil prices above $110 or even $120 per barrel, depending on the extent of supply disruptions from Saudi Arabia, Kuwait, Iraq, Qatar, and the United Arab Emirates [2]. This increase would translate into higher costs for maritime, land, and air transportation, impacting industrial production and increasing the prices of energy-intensive goods.

Beyond Oil: Disruptions to Key Supply Chains

The impact extends far beyond oil. The Gulf region is a major producer of petrochemical inputs and fertilizers. A significant portion of international urea and nitrogen fertilizer trade relies on logistical routes through or linked to this area. Disruptions could affect up to a third of global urea trade [2]. This would have cascading effects on multiple productive sectors, particularly agriculture, which heavily depends on these fertilizers.

the supply of petrochemical derivatives – crucial for the chemical industry, plastics, synthetic textiles, packaging, pharmaceuticals, and numerous manufacturing processes – is also at risk. A prolonged disruption would not only increase energy costs but also the price of essential intermediate inputs used in global production.

Monetary Policy Challenges and the Risk of Stagflation

The crisis introduces complexity for global monetary policy. Central banks, recently considering interest rate reductions following pandemic-related inflationary slowdowns, may find their options limited. An energy supply shock-driven rise in inflation could force central banks to maintain or even tighten monetary policy to prevent inflation expectations from becoming unanchored. This raises the specter of stagflation – a combination of weak economic growth and persistent inflation, a scenario not seen since the 1970s.

Regional Impacts: Latin America and Peru

The effects will be heterogeneous across regions. Hydrocarbon-exporting countries may benefit from higher prices, but many economies dependent on fuel imports and oil-derived inputs will face inflationary pressures.

Peru, in particular, would experience impacts through multiple channels. As a significant fuel importer (diesel imports exceed 100,000 barrels per day), Peru would see increased transportation and distribution costs, driving up internal prices. The country also relies heavily on imported inputs, with over 70% of fertilizer consumption coming from abroad. A disruption could lead to fertilizer prices similar to those seen in 2022, exceeding $800 per ton [2], raising production costs across various sectors.

Increased geopolitical risk could also lead to higher risk premiums, exchange rate pressure, and financial volatility in emerging economies like Peru. However, Peru’s position as a major gold and copper producer could provide a partial offset, as these metals tend to benefit from global uncertainty.

Mitigating Factors and Future Outlook

Despite these challenges, Peru possesses some buffers. Its significant gold and copper production could generate increased export revenue, partially offsetting the negative impacts of rising energy prices. The U.S. Military actions and insurance backstops may help to preserve trade flowing, but some supply chain experts say it would only seize a few weeks for the impact to hit prices across a wide range of products [2].

a protracted conflict in the Middle East would present significant challenges for Peru, including greater inflationary pressures, higher production costs, and increased financial volatility. The Central Reserve Bank of Peru may be forced to unhurried or halt planned interest rate reductions to combat rising inflation. Given the rapid transmission of energy shocks to local inflation, particularly through fuel, transportation, and food, a depreciating exchange rate in a more uncertain global environment could amplify these effects.

While the probability of a high-stress scenario remains uncertain, ignoring these risks is not an option. Strengthening macroeconomic buffers and anticipating potential disruptions are crucial for countries highly integrated into international trade and dependent on imported energy inputs. As the saying goes, a warned war does not kill people… or at least it allows the damage to be minimized.