The Strait of Hormuz remains virtually closed, with effects spreading through the global economy within weeks by disrupting energy flows, raising prices and increasing financial pressure on developing countries, UN Trade and Development (UNCTAD) warns in its second rapid assessment. The update follows an initial assessment issued on March 10 and confirms a rapid worsening of global conditions since the escalation at the end of February, with risks now extending well beyond energy markets.

Ship transits dropped from around 130 per day in February to just 6 in March – a collapse of about 95%. The region is central to global fertilizer supply, both as a producer and a key trade route.

Fuel prices have risen sharply since the escalation on February 28 and remain elevated, while the cost of transporting oil has also increased significantly.

Freight rates for oil tankers have risen by more than 90% since late February.

Bunker fuel prices have nearly doubled, while war risk insurance premiums have surged, with some insurers withdrawing coverage altogether for vessels operating in the Persian Gulf.

As a result, shipowners are being forced either to suspend transits or absorb sharply higher insurance costs, with premiums rising several times over for each voyage.

Oil and liquefied natural gas carriers, which rely heavily on Gulf routes, have been hit hardest, facing reduced volumes and higher risk costs.

Other segments, such as container and dry bulk shipping, are more insulated but still affected by rising costs and disruptions.

If disruptions persist or intensify, UNCTAD warns that damage to energy infrastructure could keep prices elevated for longer, prolonging inflationary pressures. Regions more dependent on Middle East energy imports, particularly South Asia and Europe, would be more exposed.

Trade started 2026 on a strong footing but is expected to lose momentum as the year progresses. Growth in global merchandise trade is projected to decelerate from about 4.7% in 2025 to between 1.5% and 2.5% in 2026, as global demand weakens and uncertainty rises.

The disruptions represent a major supply shock, pushing prices up while weighing on demand. Global growth is expected to slow from 2.9% in 2025 to 2.6% in 2026, assuming the conflict does not intensify further.

As uncertainty rises, investors are shifting away from riskier assets, selling stocks, bonds and currencies in developing countries. The sell-off has been more pronounced than in advanced economies.

Currencies in developing countries have weakened, making imports such as fuel and food more expensive. At the same time, countries are facing higher costs to borrow on international markets, making it harder to raise capital when it is most needed.

Borrowing costs have risen across developing regions in the weeks since the escalation.

Oil prices have surged sharply, while natural gas prices have risen steeply across both Europe and Asia – in Asia, prices have roughly doubled, with Europe seeing similarly sharp increases.

UNCTAD warns the consequences are now feeding directly into the global economy.

“Soaring oil and gas prices may inflate the cost of living, squeezing the livelihoods of the most vulnerable. Trade and growth are expected to slow in 2026. Financial ramifications for developing countries include falling stock prices, weakening currencies, and rising cost of external debt,” the report states. “If the military escalation and disruptions persist, the suffering will extend far beyond the region, translating into widespread economic hardship.”