As the cost of crude oil continued to rise there are now fears that the threats to passage through the vital Strait of Hormuz will not end at the ceasing of hostilities.
Amid ongoing threats to Iran’s oil capabilities, the country’s ruling regime has doubled down on its efforts to block the Strait which usually carries around 20% of the world’s oil and gas.
Specialty risk intelligence company Russell has said its data has found with the war in the Middle East now entering its second month Japan, India, South Korea, China along with a host of other nations are experiencing disruption to their trade because of commodity shortages.
The company said it had identified Crude Oil and LNG as the main commodities impacted from the conflict in the region.
In addition, Russell revealed that 64% of all crude oil exports and 96% of all LPG exports in the month of the war are currently trapped in the Strait of Hormuz. The trapped oil and gas were scheduled to head to India, China, Thailand, Indonesia, Japan, South Korea, Singapore, and Taiwan.
In a sign of the war’s potential broader economic headwinds, commodities such as helium, fertiliser, and aluminium, which are reliant on the Gulf’s energy, are being impacted.
Further breakdown of the scheduled exports of these commodities from the Gulf, show that 75% of all exports of industrial gases, 49% of fertiliser exports, and 15% of aluminium exports were headed to the same nations.
At present Southeast Asia is facing the most significant impact on trade. Japan has seen a 10% drop in trade India has seen trade fall by 9% while south Korea has seen a 6% fall.
Suki Basi, Russell’s managing director said the longer the conflict continues the greater the glob al impact.
“The war in Iran has now reached one month, with no end in sight,” he explained. “The disruption to the global economy has been restricted to the nearby region of Southeast Asia, as our data indicates. Yet, continued disruption to industrial gases such as helium, fertiliser and aluminium will respectively affect AI developments, agriculture, and the wider economy.
“Consequently, there is the possibility that the longer this war drags on, the greater the likelihood of a knock-on effect to the global economy, because of potential shortages of key commodities.
“Therefore, it is imperative that businesses and governments start implementing policies and measures to ensure that they are resilient to potential disruptions should this conflict continue.”
However, there are growing concerns that Iran is drawing up plans to charge vessels to transit the Strait once peace is restored and will ban vessels sailing under the flags of nations with which they are in dispute.
The Strait is deemed to be international waters but Iran’s ability to effectively close the waterway during the conflict has created the situation where the regime believes that it can control the strait at will.
It came after the leaders of the United Kingdom, France, Germany, Italy, the Netherlands, Japan, Canada, Republic of Korea, New Zealand, Denmark, Latvia, Slovenia, Estonia, Norway, Sweden, Finland, Czechia, Romania, Bahrain, Lithuania, Australia, United Arab Emirates, Portugal, Trinidad & Tobago, Dominican Republic, Croatia, Bulgaria, Kosovo, Panama, North Macedonia, Nigeria, Montenegro, Albania, Marshall Islands, Chile and Moldova issued a joint statement on the Strait of Hormuz.
It said: “We condemn in the strongest terms recent attacks by Iran on unarmed commercial vessels in the Gulf, attacks on civilian infrastructure including oil and gas installations, and the de facto closure of the Strait of Hormuz by Iranian forces.
“We express our deep concern about the escalating conflict. We call on Iran to cease immediately its threats, laying of mines, drone and missile attacks and other attempts to block the Strait to commercial shipping, and to comply with UN Security Council Resolution 2817.
“Freedom of navigation is a fundamental principle of international law, including under the United Nations Convention on the Law of the Sea.
“The effects of Iran’s actions will be felt by people in all parts of the world, especially the most vulnerable.
“Consistent with UNSC Resolution 2817, we emphasise that such interference with international shipping and the disruption of global energy supply chains constitute a threat to international peace and security. In this regard, we call for an immediate comprehensive moratorium on attacks on civilian infrastructure, including oil and gas installations.
“We express our readiness to contribute to appropriate efforts to ensure safe passage through the Strait.”
Russell revealed that 64% of all crude oil exports and 96% of all LPG exports in the month of the war are currently trapped in the Strait of Hormuz. The trapped oil and gas were scheduled to head to India, China, Thailand, Indonesia, Japan, South Korea, Singapore, and Taiwan.
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