US Hormuz blockade and what it means for global supply chains

As global attention turned to Islamabad in hopes of a diplomatic off-ramp from escalating US-Israel-Iran tensions, talks between Washington and Tehran ended without a breakthrough, raising fears that the conflict is entering a new and more dangerous phase.

Within hours of the failed negotiations, US President Donald Trump escalated his rhetoric again, announcing a naval blockade targeting Iran’s oil exports in the Gulf and tasking CENTCOM with enforcing the measure. 

The move marks a significant escalation following the collapse of talks in Pakistan, after which Washington ordered a blockade of maritime traffic linked to Iran. 

Tehran issued a stark warning: if the security of its ports in the Persian Gulf and the Sea of Oman is threatened, no port in those waters will be safe, according to a statement carried by state media.

While Trump’s blockade echoes earlier US pressure tactics, particularly against Venezuela, analysts caution that the comparison is limited. 

The geopolitical stakes, geographic realities, and global economic implications surrounding Iran, especially given its position along the Strait of Hormuz, make this confrontation far more consequential.

Both Venezuela and Iran are oil-rich countries that have historically aligned on anti-Western positions, particularly before the US-led ouster of Nicolás Maduro in a special forces operation in Caracas. 

While Venezuela lies in the Americas, close to US shores, Iran is located in the volatile Middle East and controls the Strait of Hormuz, a critical global chokepoint for energy supplies.

“In terms of impact on the global economy and the scope of American military maneuvering in the Caribbean Sea and the Indian Ocean near the Strait of Hormuz, I don't think a comparison is feasible,” Nurullah Gur, a Turkish economist, tells TRT World.

Iran is no Venezuela

In contrast to the Venezuela situation, where there was no direct military clash between US and Venezuelan forces, the Trump administration and the Netanyahu government have been involved in a five-week conflict with Iran, yet they have not secured clear military dominance. 

Tehran has sustained its leverage by effectively controlling the Strait of Hormuz, which disrupts oil shipments and hampers trade, including those involving US-aligned vessels.

US Vice President JD Vance stated that Iran, whose supreme leader and several political and military figures were killed in joint US-Israel strikes under Operation Epic Fury, showed no willingness to accept the American delegation’s “terms” during the Islamabad talks. 

This indicates that Tehran is unlikely to submit to Washington’s pressure, even if military escalation continues.

By contrast, in Venezuela, following the capture of Nicolás Maduro by US forces, the remaining leadership appeared to move towards an understanding with Washington, aligning more closely with Trump’s demands.

“While US blockades on Venezuela and Iran have a similarity in relation to their function of blocking both countries’ oil shipments to China, their economic effects on regional and global economies are clearly different from each other,” Mehmet Babacan, professor of economics at Marmara University, tell TRT World.

“In the long run, the US-Iranian blockade means importing inflation for everyone. In the case of Venezuela, this was limited,” says Babacan, who is also a former member of the auditing committee of the Turkish Central Bank, referring to rising prices worldwide, from oil to food and other commodities, throughout the Iran war. 

Global downgrade

Economists forecast that the US blockade and the possible continuation of the Iran war will lead to commodity price volatility, exposing the world economy to upward risks to inflation and increasing interest rates. 

“Double blocking of the Hormuz Strait will further strain the global economy, deteriorating the expectations over the oil/gas prices, especially in the futures market. Immediate spillovers on commodity demand will falter production and global supply chains seeing disruptions in the mid-term,” says Babacan. 

Now, top international financial institutions, including the IMF, project a global “growth downgrade” due to supply disruptions, significant infrastructure damage across the Gulf and Iran and the lack of customer confidence. 

The UNDP also predicted that the war might put at least 32 million falling into poverty globally. 

“Had it not been for this shock, we would have been upgrading global growth,” IMF managing director Kristalina Georgieva said in a speech last week in Washington.

Rising economic volatility could also create opportunities for speculation in commodity markets, accelerating global capital flows depending on the scale of political and economic risks, according to a senior adviser to the Turkish Central Bank, who spoke on condition of anonymity due to official restrictions.

“Due to much uncertainty generated by the blockade and Iran war, their full impact on regional and global economics is not yet accurately predictable. The only thing certain is a lasting loss of output losses,” he tells TRT World. 

The adviser also notes that Israel’s economy, which is less directly tied to trade through the Strait of Hormuz than oil-exporting Gulf states and major energy-importing countries such as China, India, and Japan, is likely to be minimally affected by a US blockade.

Many experts, however, argue that Israel has drawn the United States into an unnecessary war with Iran, undermining not only Washington’s global political standing but also the economic interests of Gulf states, which depend heavily on the Strait of Hormuz for both food imports and oil and gas exports.

“Tensions and blockade will lead both the Gulf countries’ positioning in regional/global finance, logistics and supply chains and Iran’s political landscape to certain shifts, most possibly in a negative way. It has been so far a lose-lose game for the entire region,” says Babacan. 

A recent WSJ report suggested that Saudi Arabia lobbies against the longevity of the US blockade, while there have been no actual statements from Gulf states against Trump’s latest measure on Iran. 

‘Don’t capture a Chinese vessel!’

While Trump’s blockade of the Strait of Hormuz has been in effect since Monday, a US-sanctioned Chinese vessel, Rich Starry, transited the waterway on Tuesday without any American intervention, according to shipping data from the London Stock Exchange Group (LSEG).

"Our ships are moving in and out of the waters of the Strait of Hormuz," said China's Defence Minister Dong Jun, in a clear defiance to the US blockade. He warned Trump that Beijing has “trade and energy agreements with Iran” and the US needs to respect them and “not to meddle in our affairs”. 

In a quiet nod to Tehran’s position, the defence minister also added that “Iran controls the Strait of Hormuz, and it is open to us,” calling the US blockade “reckless”.  

According to Luciano Zaccara, a Gulf-based political analyst specialising in Iranian and Middle Eastern politics, Trump’s advisers reportedly warned him not to “dare to capture a Chinese vessel”, referring to the passage of a Chinese ship through the US blockade, which he describes as “a clear escalation and unnecessary step”.

“Well, it looks like the US blockade, so far, is a bluff, since already Chinese ships crossed the strait without problems,” Zaccara tells TRT World. 

Experts warn that if the blockade is fully enforced, Pacific-Asia economies would be among the hardest hit, as most of their energy imports come from the Gulf region. A recent UNDP estimate also suggests the region could face output losses of between $97 billion and $299 billion due to rising costs for transportation, electricity, and food.

“The uneven consequences of the sudden disruption in oil transportation will lead to much significant unfavorable repercussions on Asian economies such as China, India, Pakistan, Bangladesh, Philippines and Indonesia in terms of global supply chains while it will have less significant impact on European economies,” says Babacan. 

Other experts note that Asian states such as South Korea and Japan, both close US allies, rely heavily on oil imports from the Middle East and could face serious difficulties in the event of a US blockade on Gulf energy exports.

While Asian economies would be the most vulnerable to both the war and a blockade, which could trigger an oil crisis across the region, their losses would also ripple globally, as the world’s most populous continent accounts for more than half of global manufacturing, according to Gur, the Turkish economist.

“This might lead to a global stagflation, an undesired situation when prices continue to stay high due to rising energy costs alongside an economic stagnation, leaving the world to face a bad financial scenario,” he says. 

As a result, China, the world’s second-largest economy, which has a strong interest in avoiding such a scenario, is likely to be more insistent than any other country on reaching a settlement between Iran and the United States, with the aim of ensuring the continued flow of oil through the Strait of Hormuz, the economist adds.