The ongoing conflict involving Iran and the disruption of the Strait of Hormuz are triggering a broad-based supply shock that extends far beyond oil, raising serious concerns for global trade flows, industrial production, and policy stability across key economies.
According to open-source economic analyses, the Strait of Hormuz facilitates nearly 20% of global oil shipments and around a quarter of liquefied natural gas (LNG) trade. With the route disrupted for weeks, supply delays are now affecting a wide range of critical industrial inputs, many of which are heavily concentrated in the Middle East.
Trade Exposure Across Key Inputs
Data indicates that several essential commodities have significant dependency on the region:
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Sulphur (45%) – vital for fertilisers and chemical production
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LPG (Butane 44%, Propane 25%) – key fuel and petrochemical feedstock
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Crude Oil (34%) – foundational input for fuels and industrial chemicals
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Helium (33%) – critical for semiconductors and medical imaging
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Methanol (30%) – used in plastics and solvents
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Aluminium (24%) – essential for transport and packaging industries
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Fertilisers (Urea/DAP/Ammonia – 22%) – crucial for agriculture
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LNG (19%) and Naphtha (17%) – central to power and petrochemical sectors
This concentration creates structural vulnerabilities in global trade. Even minor disruptions in these supply chains can lead to cascading effects across industries, a phenomenon analysts describe as “non-linear impact.”
Sectoral Impact on Trade and Industry
The supply shock is already being felt across multiple sectors:
Agriculture and Fertilisers: Disruptions in sulphur and ammonia supplies are pushing up fertiliser costs, directly impacting crop production and food prices. Import-dependent economies face heightened inflation risks.
Energy and Fuels: Crude oil, LPG, and LNG shortages are affecting both household consumption and industrial output. Countries like India, where over 40% of crude imports pass through Hormuz, are particularly exposed.
Manufacturing and Petrochemicals: Inputs such as methanol, butadiene, and naphtha are essential for plastics, textiles, and automotive components. Supply constraints are increasing production costs and disrupting export-oriented industries.
Metals and Heavy Industry: Aluminium production, which is energy-intensive, is facing dual pressure from rising energy costs and supply constraints, impacting construction and manufacturing trade.
High-Tech and Healthcare: Helium shortages largely supplied by Qatar, pose risks to semiconductor manufacturing and medical technologies, underlining the strategic importance of niche inputs in global trade.
Asia’s Trade Vulnerability
Asian economies are among the most affected due to their heavy reliance on Middle Eastern imports. Countries such as India, Japan, South Korea, and Taiwan have approximately 50% exposure to energy trade from the region. Limited strategic reserves in some of these economies further amplify the risk of supply disruptions.
Policy Responses and Market Impact
Governments are beginning to respond with a mix of policy interventions, including fuel subsidies, tax adjustments, and rationing measures to manage domestic supply. India, for instance, has initiated LNG rationing and adjusted LPG pricing to cushion the impact.
From a trade perspective, the immediate impact is being reflected more in price volatility than volume contraction. Global oil prices have already crossed $100 per barrel, while LNG and petrochemical inputs continue to see upward pressure. However, prolonged disruption could lead to production cuts, export slowdowns, and a broader deceleration in global economic growth.
Strategic Implications for Global Trade
The current crisis highlights the risks of overdependence on geographically concentrated supply chains. It underscores the need for diversification of sourcing, strategic reserves, and resilient trade infrastructure. Policymakers are increasingly focused on securing alternative supply routes and strengthening domestic capabilities to mitigate future shocks.
As the conflict continues, the ripple effects are expected to deepen, affecting not just energy markets but the entire global trade ecosystem from agriculture and manufacturing to high-tech industries. The evolving situation will remain a critical test of how economies adapt to supply disruptions in an increasingly interconnected world.