Renewed Hostilities in the Strait of Hormuz Threaten to Compound Global Supply Chain Costs

17.07.2026

By Maximilian Malawista

Source: https://www.ipsnews.net/2026/07/renewed-hostilities-in-the-strait-of-hormuz-threaten-to-compound-global-supply-chain-costs/

UNITED NATIONS, Jul 17 2026 (IPS) - A continuation of hostilities within the Strait of Hormuz is once again threatening one of the world’s most critical  supply chain arteries, posing another wave of disruption which could choke the global energy,  shipping and commodity markets. With roughly a quarter of global seaborne oil trade transiting through the Strait, alongside significant flows of liquefied natural gas and fertilizers, further constraints on commercial traffic could send new cost pressures cascading through supply chains that have yet to absorb the full effects of the earlier conflict.

Unlike the initial disruption, this latest escalation is hitting an already elevated and damaged cost base. U.S. President Donald Trump had proposed a 20 percent charge on cargo transiting the Strait, a plan he abandoned on July 14th after pressure from Gulf allies. At a current crude oil price of roughly USD 85 per barrel, a 20 percent levy on all cargo would amount to an additional USD 17 per barrel, around 17 times Iran’s previously proposed USD 1 per barrel toll.

Yet, the larger challenge remains whether an assurance of safety through the Strait can really be guaranteed. While Washington has promised to safeguard commercial vessels attempting to transit, multiple vessels have been struck by Iranian forces, including the UAE-flagged supertankers Mombasa and Al Bahiyah on July 12th. Both vessels have a capacity of roughly 2 million barrels of oil, placing the potential value of a full cargo at roughly USD 171 million before insurance, maintenance and transit costs are considered.

If continued attacks deter vessels from transiting the Strait, constrained oil flows could combine with increased insurance premiums and higher transport costs, pushing additional expenses through global supply chains and eventually onto consumers.

These effects are already visible when examining vessel movements. On July 15th, a total of five transits were recorded, three inbound and two outbound, with one of those ships being Iranian-flagged outbound. Daily throughput in deadweight tonnage (DWT) stood at 130,311 DWT, or just 1.27 percent of the 10.3 million DWT pre-conflict daily average. Meanwhile, approximately 450 vessels remain waiting to transit the Strait, including 120 tankers, 180 bulk carriers and 150 other vessels.

War risk premiums, the additional fees charged to insure vessels operating within conflict zones, have skyrocketed from a 0.15 percent pre-conflict rate to 5 percent, a more than 33-fold increase. Very large crude carriers (VLCCs) can be valued from USD 130 million to more than USD 170 million, meaning a five percent premium could add an additional cost of USD 6.5 million to USD 8.75 million per voyage. For a VLCC carrying 2 million barrels, that would amount to roughly USD 7.5 million, compared with approximately USD 2.225 million under Iran’s proposed USD 1-per-barrel toll combined with pre-conflict war-risk premiums.

However, the compounding effects extend beyond oil. Data from the World Trade Organization’s (WTO) Strait of Hormuz Trade Tracker shows that while crude oil shipments had begun to recover marginally, liquefied natural gas (LNG) and fertilizer-related shipments remain at a virtual standstill, with zero outbound shipments currently recorded. Renewed escalations risk further restricting already depressed commodity flows, with approximately one-third of the world’s seaborne fertilizer trade and one-fifth of global LNG transiting through the Strait.

Using a volume index in which 100 represents average volume levels, the WTO recorded a volume index of 25.69 for LNG on July 5th, following nearly four months in which shipments were recorded on only four other days. Fertilizer-related shipments showed greater resilience, recording a volume index of 97.62 on June 23rd. However, no further fertilizer-related shipments have been recorded, leaving the trade flow at a standstill for more than three weeks.

These restrictions could be particularly damaging for energy- and food-importing  economies, notably developing countries that spend significant shares of national income on essential imports of energy and food. Simultaneous increases in fuel, transportation, and agricultural inputs risk creating a broader inflationary shock. Higher fertilizer costs can increase agricultural production costs, while elevated energy and shipping expenses raise the cost of transporting goods from exporters to importers, leaving consumers exposed to several layers of the same disruption.

The disruption has also carried a significant human cost. The International Maritime Organization (IMO) has warned against continued commercial transit through the Strait, with IMO Secretary-General Arsenio Dominguez urging shipowners, operators, and flag States, along with all relevant authorities to “avoid exposing seafarers to unnecessary danger by transiting the Strait.” At the same time, the United States has announced that it will resume a naval blockade targeting vessels transiting to and from Iranian ports. Iran, meanwhile, has framed its control over the Strait as a national security issue and has threatened that it will remain closed “until the end of America’s evils.”

At its 137th session, the IMO Council reaffirmed that the right of transit through straits used for international navigation “should not be threatened, impeded, denied, hampered, impaired or suspended,” reiterating that any measures taken by coastal states to regulate traffic in vital  shipping lanes should be done in accordance with IMO regulations under the International Convention on the Safety of Life at Sea (SOLAS). The Council also stated that traffic through the Strait must “remain free of any tolls and charges, in accordance with international law, including the IMO Convention.” Shipping& Logistics

UN High Commissioner for Human Rights Volker Türk warned that “Reports on the closure of the Strait of Hormuz are very alarming for their impact on  human rights far beyond the region,” describing the Strait as “a vital lifeline on which millions are reliant.”

The dangers are also being borne directly by seafarers trapped in the Persian Gulf. Of approximately 20,000 seafarers stranded by the crisis, around 11,000 have been evacuated through an IMO-supported initiative. However, evacuation operations have reportedly been paused since June 25, leaving thousands still stranded.

The economic consequences of the initial disruption were already substantial before this latest escalation. According to the World Bank, global energy prices rose by 24 percent following the conflict’s onset, with fertilizer prices projected to rise by more than 30 percent in 2026. Renewed hostilities in the Strait now threaten to compound these pressures, demonstrating how insecurity within a narrow stretch of water can transmit costs across global supply chains, from ships at sea to businesses, households and economies around the world.

IPS UN Bureau Report