Mar 16th 2026|6 min read
Listen to this story
SINCE THE third Gulf war began three weeks ago one number has captured the world’s attention: the price of crude. On March 19th Brent, the global benchmark, briefly surpassed $115 a barrel—higher than its average of 2022, the year Russia launched its full-scale invasion of Ukraine. Some 10-15% of global oil supply remains trapped behind the Strait of Hormuz.
But oil is not the only commodity stuck there. So are plenty of others. The Gulf states, it is rapidly becoming clear, matter for the supply of much more than fossil fuel. Their vast hydrocarbon reserves make them ideal locations for firms that process raw materials. It also helps that they are situated between fast-growing Asia and wealthy Europe. And so 22% of the world’s traded urea, 24% of its aluminium, a third of its helium and 45% of its sulphur come from the region. As drones hit plants and the Hormuz blockade strands exports, such crucial supply chains are experiencing an almighty crunch. Three industries—transport, manufacturing and food production—are already suffering. And the damage looks set only to grow.
Take transport, and the refined products on which it relies, first. The near-disappearance of Gulf crude has caused Asian refiners acute problems. As well as being far dearer, alternative supplies are lighter and lower in sulphur than their plants were built to process. This increases refiners’ operating costs, can damage their equipment and yields less diesel and jet fuel—the scarcest products right now. Margins have collapsed, prompting processing cuts of 5-15% in China, India, Japan and Thailand, and more elsewhere.
Meanwhile Gulf refineries, among the world’s largest, have barely shipped anything since late February. The little oil rerouted via pipelines in Saudi Arabia and the United Arab Emirates (UAE) is unrefined. So is the cargo carried by the few tankers that have dared to traverse the strait. Vortexa, a ship-tracker, estimates that 125 product tankers, or 5% of the global fleet, are trapped in the Gulf.
Chart: The Economist
That double whammy has alarmed China into suspending all refined-product exports—turbocharging prices of petrol, diesel and jet fuel in Singapore, Asia’s oil-trading hub (see chart 1). Europe is feeling the squeeze, too: last year it sourced 69% of its jet-fuel imports from the Gulf or Asia. The cost of shipping fuel is going through the roof everywhere.
The crunch will get worse before it gets better. Modelling by Michelle Brouhard of Kpler, a data firm, suggests that if Hormuz stays blocked, Oceania will have burned through 80% of its jet-fuel stocks within 36 days and Africa within 23. Asian countries outside China, Japan and South Korea will be critically short of petrol in 12 days. Many poorer places are already closing schools, shortening working weeks and rationing fuel. Even a swift reopening of Hormuz would not restore normality quickly, owing to refinery damage, shattered infrastructure and shippers’ reluctance to return to the Gulf.
Manufacturing is the second industry under severe strain, because of its reliance on the Gulf’s petrochemical plants, which are largely unable to export their wares. The region accounts for nearly 45% of global seaborne naphtha flows and 23-30% of exports of other key plastic inputs, including styrene and polyethylene. Several Asian plastic-makers have already declared force majeure, meaning they are unable to fulfil contracts owing to factors beyond their control.
The active compounds in most drugs, from aspirin to antibiotics, also require petrochemicals. China imports large volumes of petrochemical feedstocks from the Gulf. India, the world’s largest maker of generic drugs, is exposed, too. In addition, the Gulf supplies 26% of the world’s industrial diamonds (essential for cutting and drilling tools), 26% of its glycol (a paint ingredient) and 30% of its methanol (used in plastics, resins, chemicals production and building materials).
Most striking has been the impact on aluminium, which is used for packaging, transport, power grids and renewable energy. Qatar’s mega-smelter is short of gas, while plants in Bahrain and the UAE cannot export. All depend on imported raw materials they are no longer receiving. Although Oman exports aluminium from a port lying outside the strait, it is under attack and shipping costs are soaring.
Chart: The Economist
As a consequence, the price on the London Metal Exchange for aluminium delivered in three months’ time is up by $300, to $3,440 a tonne—near its highest in four years. Distress is greatest in the regions that are most dependent on Gulf supplies: Europe, where they account for 14% of imports, and America, where they make up 21%. Delivery premiums for both have hit records (see chart 2).
Iran is also a significant supplier of semi-finished steel, meaning billets and slabs, to Asia. As exports have fallen, prices for crucial grades have leapt. Lora Stoyanova of Argus Media, a price-reporting agency, notes that the crunch has even made slab, an intermediate product, dearer than hot-rolled coil, the finished stuff. It is as if a raw lump of dough has become costlier than a baked loaf of bread.
Perhaps the most unexpected industrial casualty is helium, a gas that is essential for cooling the supermagnets used to make semiconductor chips, and which is a byproduct of liquefied natural gas (LNG). Qatar produced 17 tonnes of helium per day—roughly a third of global supply—at Ras Laffan, the megacomplex that until the war made and shipped nearly a fifth of the world’s LNg. Now, however, Ras Laffan has shut down, and there are no ready substitutes for helium.
Even more ominous is the threat to global food production, the third industry severely affected by the war. The United Nations estimates that a third of global seaborne fertiliser trade passes through Hormuz. Roughly two-thirds of this is urea (often produced from natural gas); most of the rest is phosphate. Poor countries will be hit hardest: Kenya, Pakistan, Somalia, Sri Lanka and Tanzania each get more than a quarter of their fertiliser from the Gulf. For Sudan, the share rises to over half.
Chart: The Economist
Prices are already moving sharply. That of urea is up by 35% since the start of the war (see chart 3). The fertiliser was expensive to start with: over the past three months, prices for deliveries to America have surged by over 70%.
Sulphur, another plant nutrient, is also in short supply. Prices have risen by 40% since late February, surpassing a previous peak hit in 2022. One trader says the regional market for short-term delivery is “at a standstill”. On top of sulphur’s use as a fertiliser, sulphuric acid is essential for leaching metals from ore in copper and nickel processing. Miners from Indonesia and Africa are scrambling for alternatives.
Svein Tore Holsether, chief executive of Yara, one of the world’s largest fertiliser companies, has warned that a prolonged Hormuz closure would be “catastrophic” for food supply. With spring planting imminent across the northern hemisphere, farmers face painful choices: pay sharply higher prices, reduce application rates or plant less maize and wheat (the most nutrient-hungry cereal crops). On March 13th Brooke Rollins, America’s agriculture secretary, said that the government was examining financial “solutions” to support farmers, calling the fertiliser crunch a “national security issue”.
For the industries hit by all these shortages, a countdown has begun. Fertiliser that arrives weeks late cannot be used for the 2026 harvest. The knock-on effects of stopping metal processing midway could persist well into 2027. Restarting idle refineries, smelters and petrochemical plants—which operate at extreme temperatures and pressures—may take months. An awful lot of the world’s supply chains pass through a 54km-wide channel alongside Iran. Quite how vulnerable that makes them is only just becoming clear. ■
For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter.
This article appeared in the Finance & economics section of the print edition under the headline “Scattershock”
Discover stories from this section and more in the list of contents
Subscriber only | Money Talks
Delivered to your inbox every week
Yes, I agree to receive exclusive content, offers and updates to products and services from The Economist Group. I can change these preferences at any time.