How a Trump Strait of Hormuz blockade could hit the global economy

A prolonged US blockade of one of the world’s most critical maritime chokepoints threatens to send fresh shocks through energy markets and supply chains, raising new risks and costs for economies far beyond the Gulf.

By Sanjoy Paul, University of Technology Sydney

For weeks, the global economy has been fixated on a single question: when will the Strait of Hormuz fully reopen? Following Iran’s war with Israel and the United States, Tehran has in effect shut the narrow passage, a route that normally carries about one-fifth of the world’s oil and gas.

Some vessels have still moved through during the conflict, but mostly under Iranian conditions, including reports that ships paid tolls in exchange for safe passage.

From RTÉ Radio 1’s Today with David McCullagh on April 8, Iran agrees to reopen Strait of Hormuz after ceasefire deal with US

Restoring full access to the strait for all commercial traffic was a central condition of the two-week ceasefire reached last week. But when weekend talks between the US and Iran failed to produce an agreement, US president Donald Trump announced a sharp escalation on Truth Social: “Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz.”

US Central Command later said a blockade on all Iranian ports would begin on April 13 at 10am eastern time in the US. Washington’s aim is to squeeze the Iranian economy by limiting its exports and compel Tehran to permit unrestricted shipping. Iran, however, has warned that the consequences will not stop at its borders.

So if the stated goal is to get oil and gas moving again, why has the US chosen to blockade the Strait of Hormuz? And what might that mean for the rest of the world?

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From RTÉ Radio 1’s Drivetime on April 13, director for maritime security services at Control Risks Cormac McGarry on the US blockade of Strait of Hormuz

Iran’s dependence on oil

According to the International Energy Agency (IEA), Iran was producing 3.59 million barrels of crude oil a day in February, before the war began. Global crude oil demand in 2025 stood at about 105 million barrels per day. That puts Iran’s share at roughly 3.5% of world demand, enough to matter in the global oil market.

Oil and gas dominate Iran’s economy, with crude oil in particular accounting for 57% of the country’s total export revenue in 2024. China is by far the biggest customer, taking about 90% of Iran’s oil exports in 2024. Syria bought 3.3%, while the United Arab Emirates took 2%. Iraq, Turkey, Malaysia and Oman each purchased less than 1% of Iranian oil exports. Iran also ships petrochemical products including methanol, urea, polyethylene and ammonia.

How the blockade is expected to operate

US Central Command says the blockade will apply to all vessels entering or leaving Iranian ports and coastal areas. Iran has 11 major ports in total. Eight sit to the south in the Arabian Gulf and Gulf of Oman regions, while three are in the Caspian Sea in the north and serve regional trade. Ports in those areas are expected to be affected by the targeted blockade, including Kharg Island, which handles about 90% of Iran’s crude exports.

Major Iranian ports, oil terminals and coastal refineries. Reuters, CC BY-SA

What could the fallout be?

Oil prices climbed again after news of the blockade, reversing some of the decline that followed last week’s ceasefire announcement.

Trump has not presented the blockade as an indefinite measure. As he wrote in his Truth Social post announcing the the move:

At some point, we will reach an “ALL BEING ALLOWED TO GO IN, ALL BEING ALLOWED TO GO OUT” basis but Iran has not allowed that to happen […] No one who pays an illegal toll will have safe passage on the high seas.

Even so, the duration of a blockade, its effectiveness and the scale of disruption to shipping remain difficult to gauge. China, as the principal buyer of Iranian crude, would feel the effects first. More broadly, the shock could tighten oil supply and help drive prices higher across global markets.

The strain may not be limited to energy. Several Gulf states routinely import essential materials and food-related products from Iran. In 2022, for example, the United Arab Emirates imported mineral fuels, oils, distillation products, organic chemicals, iron and steel, copper and fertilisers from Iran.

From RTÉ News, US President Donald Trump says Iran ‘wants’ a deal

Oman and Qatar also rely on imports from Iran for important goods, including steel, iron, construction materials, petrochemicals, agricultural products and fruits.

Strain on agriculture

Urea, a key fertiliser for global farming, warrants particular attention. Iran is a major urea producer and the largest exporter of it in the Gulf region.

That matters because farmers worldwide are already facing mounting pressure as the conflict puts severe stress on fertiliser supplies.

Even countries that do not buy fertiliser directly from Iran, including Brazil, India and Australia, could still feel the impact through wider disruption to the global fertiliser supply chain.

A nervous global pause

After the collapse of peace talks, Trump says he is acting to halt Iran’s “world extortion” — a reference chiefly to Tehran charging ships for safe passage through the Strait of Hormuz. Yet a US blockade could itself trigger fresh costs for the world economy.

For governments and businesses alike, that uncertainty underlines the importance of diversifying crude oil supplies and expanding domestic refining capacity.

Over the longer term, faster uptake of renewable energy and the electrification of transport, manufacturing and logistics could help countries reduce their dependence on oil.

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Sanjoy Paul is Associate Professor in Operations and Supply Chain Management at the UTS Business School at University of Technology Sydney. This article was originally published by The Conversation.

The views expressed here are those of the author and do not represent or reflect the views of RTÉ