The cost of closing the Strait of Hormuz: Energy bottlenecks and global food security

Julian Hinz, Hendrik Mahlkow, Robin Sogalla and Gerald Willmann

No 206, Kiel Policy Briefs from Kiel Institute for the World Economy

Abstract: • In March 2026, the Strait of Hormuz is closed. The shutdown blocks roughly one-fifth of the world's oil and one-quarter of its liquefied natural gas, triggering severe welfare losses in energy-dependent developing countries worldwide. • Standard trade models underestimate the impact because they miss the bottleneck mechanism: energy disruptions cascade through chemicals and fertilizer production into food prices, amplifying losses for the world's poorest countries. • Developing countries that depend on imported energy and fertilizers-particularly in South Asia, sub-Saharan Africa, and the Middle East-face the steepest food price increases and welfare losses. The aggregate global costs are moderate, but the burden falls disproportionately on the world's poorest: the USA loses just -0.07%, while countries in South Asia and Africa face losses 10-20 times larger. • A prolonged closure allows some market adjustment, but structural damage persists-and the timing during peak Northern hemisphere planting season compounds the food security risk.

Keywords: Strait of Hormuz; Energy Security; Food Prices; Critical Inputs; Bottleneck Effects; Trade Disruption; Straße von Hormus; Energiesicherheit; Lebensmittelpreise; kritische Vorleistungen Engpass-Effekte; Handelsstörungen (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-int and nep-min
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