The Strait of Hormuz crisis is coming to an end, on paper at least. The United States and Iran have signed a memorandum of understanding to end the fighting and reopen the strait. Oil traders will exhale. Developing economies may not. A ceasefire does not erase the deeper lesson of the past few months: in today’s global economy, a maritime chokepoint can become a debt crisis, an inflation shock, and a political stability problem almost overnight.

The Strait of Hormuz is more than just a strait between Iran and Oman. It is one of the main arteries of the world economy. UN Trade and Development has characterized it as a path that transports roughly 25% of the seaborne oil trade across the world, as well as most of the LNG and fertilizer transport. When traffic slows through such a corridor, the effects are not limited to tankers. It runs through freight rates, insurance premiums, fertilizer prices, food costs, exchange rates, and public budgets.

The Hormuz crisis is therefore not just a security issue in the Middle East, but also an international political economy issue. The shock rippled through the global system in a now-familiar sequence. First, the rise in energy prices. Then there were higher shipping and risk costs. Then the strain on food and transport. Investors pulled back from fragile markets. Third, weaker currencies meant more expensive imports for countries already struggling with debt. 

UNCTAD’s trade outlook for 2026 warned of a sharp slowdown in the growth of world merchandise trade, even as developing country currencies and borrowing conditions were already under pressure. Its separate debt assessment, A World of Debt 2025, said 3.4 billion people live in........

© Paradigm Shift