Economic implications of potential disruptions in the Strait of Hormuz and the Red Sea

A simultaneous closure of the Strait of Hormuz and the Red Sea would create a severe global supply shock, according to analysis by Christos Christodoulou-Volos. The Strait of Hormuz facilitates the transit of approximately 20% of the world's oil, significantly impacting major producers like Saudi Arabia, Iraq, and the United Arab Emirates. While alternative pipelines exist, they are insufficient to offset the loss of maritime capacity. Furthermore, the Red Sea serves as a critical route for LNG and container shipping between Asia and Europe. A disruption in these areas would force vessels to route around the Cape of Good Hope, leading to increased transport costs and delays. Qatar, a major LNG exporter, would face major distribution challenges through the Strait of Hormuz. Such events would drive up global energy prices, likely causing an energy crisis in Europe and Asia. The disruption would also affect the global supply of fertilizers, such as ammonia and nitrogen products, due to the Middle East's central role in these exports.