The Iran war has shut down the Strait of Hormuz, halting 27 percent of global seaborne oil flows and sending energy prices soaring. But the economic fallout extends far beyond crude.
The strait also handles 11 percent of global maritime trade, including vital shipments of petrochemicals, fertilizers, aluminum, and semiconductor inputs. Gulf states are major exporters of ethylene, propylene, and naphtha-critical feedstocks for plastics and synthetic textiles. With Hormuz closed and drone attacks disrupting Qatari facilities, Asian petrochemical producers have cut output. Naphtha prices have surged from $600 to nearly $900 per ton.
Fertilizer markets are under severe strain. One-third of global seaborne fertilizer passes through Hormuz, including half the world’s urea and 30 percent of ammonia. U.S. urea prices have jumped 25 percent to $580 per ton just as farmers enter spring planting. Wolfe Research estimates this could lift U.S. food-at-home inflation by two percentage points.
Aluminum supplies are also disrupted. Gulf producers account for 8 percent of global output, and Bahrain hosts the world’s largest smelter. Shipments are stranded, capacity idled, and LME prices have hit multi-year highs. U.S. buyers face record premiums due to pre-existing Trump tariffs and lost Canadian supply.
Semiconductor production is at risk. Gulf states supply a third of global helium-used to cool chip fabs-and Taiwan relies on Middle Eastern LNG for 37 percent of its energy. Israeli bromine, essential for wafer etching, also faces disruption. TSMC, Samsung, and SK Hynix shares have dropped amid growing concern.
Global shipping has deteriorated. Over 100 container ships are stranded in the Gulf. Maersk and MSC have canceled routes. Air cargo capacity has fallen 18 percent after Dubai and Doha hubs were impacted. Fuel costs for ships and planes have spiked, pushing freight rates higher across all corridors-including trans-Pacific lanes.