As the US–Israeli offensive on Iran continues, its impact on global trade has also intensified. With the narrow shipping lane of the Strait of Hormuz effectively closed, exports from Gulf ports in Iran, Iraq, Kuwait, Bahrain, Saudi Arabia, the United Arab Emirates and Qatar have halted.
The most obvious effect of this closure is on hydrocarbons and petrochemicals – about a quarter of all seaborne oil and a fifth of liquified natural gas (LNG) has passed through the strait in recent years. Oil prices have surged, and the International Energy Authority has agreed to release millions of barrels from government oil reserves to ease supply shortages.
As the conflict has continued, some of the largest oil and gas terminals have closed down, and some Gulf states have cut production of oil, gas and chemicals – either because of attacks, or because stores are full and there are no ships to take cargoes away. Oil depots in Iran have been targeted by US–Israeli strikes.
Suddenly cutting off supplies from the Middle East could cause shortages of some feedstocks and materials – particularly in Europe and Asia, which relies on the Middle East for over half its supply of naphtha to feed petrochemicals, for example. But because sustained global overcapacity in various petrochemicals has kept prices low, producers elsewhere may decide not to step in and ramp up production until there are price incentives to do so.
But there are broader impacts on resources that are extracted as byproducts of petroleum processing. Around one-third of the world’s helium supply is cut off. Qatar is home to one of only two plants that produce all the high-grade helium used in fabricating semiconductors. If the conflict continues for more than two weeks, or if the helium production sites come under attack, supply chains will be seriously disrupted, taking months to years to recover.
Similarly the gulf states account for 44% of global elemental sulfur production, from refining ‘sour’ oil. While some refineries outside the Middle East have sulfur to sell, the problem now is finding vessels to transport it, as many ships are stranded either side of the Strait of Hormuz, and freight firms are unsure whether there will be fuel available for the journeys.
Sulfur supply restrictions will have major implications for both sulfuric acid – used extensively in metals refining and microchip production – and fertiliser production (which accounts for about 60% of global sulfur demand). With the Gulf closure also hitting exports of nitrogen fertilisers including urea and ammonia, the potential impact on global fertiliser supply is severe – just as the northern hemisphere approaches peak fertiliser demand in the spring.
How severe these impacts are, and how long the disruption lasts, is strongly dependent on the duration of the conflict, and to what extent production infrastructure is targeted by attacks from either side. And while Donald Trump has claimed that the war is ‘very complete, pretty much’, the Iran Revolutionary Guard Corps has asserted that they will determine the end of the war, vowing to maintain the export blockade as long as US–Israeli attacks continue.
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