The economic fallout from the Strait of Hormuz closure is spreading into corners of the global economy that have no obvious connection to oil, as "Hvylya" reports, citing a detailed analysis by The Economist. The disruption to roughly a fifth of global LNG shipments has triggered a cascade of secondary effects reaching fertilizer production, semiconductor manufacturing and metal smelting.
Fertilizer prices are surging because the product is manufactured using natural gas as a key input. Plants across South-East Asia are already shutting down as LNG costs soar beyond their reach. The United Nations warned on March 10 that food prices could rise as a result of higher energy, fertilizer and transport costs - a threat that falls hardest on the developing world.
Sulphur, a by-product of oil refining, is growing more expensive as refinery output drops. That matters because sulphur is essential to copper smelting. Higher sulphur costs feed into copper prices, which in turn affect construction, electronics and the green energy transition that depends heavily on the metal. The linkage illustrates how a disruption at one point in the global supply chain can propagate in unexpected directions.
Perhaps the most surprising casualty is helium. The Gulf is a significant source of the gas, which is critical for semiconductor fabrication - chip-making requires ultra-pure helium for cooling and quality control. A dearth of helium is now imperiling chip production at a time when global demand for semiconductors remains intense.
The Gulf's role as an exporter of metals and chemicals compounds the problem. A major aluminium smelter in Qatar has suspended production, and an even larger one in Bahrain has halted exports. These shutdowns ripple outward through global supply chains that had already been stretched thin by years of pandemic disruptions and trade wars. The IMF has urged governments to prepare for the "unthinkable" - an acknowledgment that the crisis is no longer confined to energy markets alone.
Also read: "Triple Shock" for China: How Iran's Fall Collapsed Beijing's Shadow Oil Network.