As the US–Israeli offensive on Iran persist, its effect on worldwide trade has also increased. 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 stopped.
The most clear impact 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 launch hundreds of thousands of barrels from government oil reserves to ease supply shortages.
As the war has persisted, some of the biggest oil and gas terminals have shut down, and a few Gulf states have cut manufacturing of oil, gas and chemicals – either due to attacks, or because stores are full and there are not any ships to take cargoes away. Oil depots in Iran have been attacked by US–Israeli strikes.
Suddenly cutting off supplies from the Middle East could cause shortages of some feedstocks and materials– especially in Europe and Asia, which is depends 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, manufacturers elsewhere may decide not to step in and ramp up manufacturing till there are price incentives to do so.
But there are broader effects 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 manufacture all of the high-grade helium used in fabricating semiconductors. If the war continues for more than two weeks, or if the helium manufacturing sites come underneath 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 move it, as many ships are stranded both aspect of the Strait of Hormuz, and freight companies are uncertain whether there will be fuel available for the journeys.
Sulfur deliver regulations may have major implications for both sulfuric acid – used notably in metals refining and microchip manufacturing – and fertiliser manufacturing (which account for about 60% of world sulfur demand). With the Gulf closure also hitting exports of nitrogen fertilisers such as urea and ammonia, the capability impact on global fertiliser supply is severe – simply because the northern hemisphere strategies peak fertiliser requirement within the spring.
How severe those affects are, and how long the disruption lasts, is strongly dependent on the duration of the warfare, and to what quantity manufacturing infrastructure is targeted by attacks from both side. And even as Donald Trump has claimed that the conflict 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.
