Without a deal between Washington and Tehran, the fallout from Hormuz closure could deepen global energy, food and cost-of-living crises.
As negotiations between the United States and Iran appear to move towards a possible breakthrough, the stakes extend far beyond diplomacy between two longstanding adversaries. At issue is not simply a ceasefire or a nuclear agreement. It is whether the world economy can avoid sliding deeper into widening energy, food and cost-of-living crises centred on the Strait of Hormuz.
Recent reports suggest Washington and Tehran are discussing a deal that would reopen the strait as part of a broader arrangement. The proposal reportedly includes a 60-day truce, the reopening of shipping lanes, some sanctions relief and renewed talks on Iran’s nuclear programme.
The urgency is obvious. Roughly a fifth of the world’s oil and a substantial share of liquefied natural gas supplies normally pass through the Strait of Hormuz. Over recent weeks, disruptions to shipping, military tensions and competing naval controls have driven up freight costs, energy prices and insurance premiums.
If a durable agreement is not reached soon, the consequences are likely to spread rapidly across the global economy.
To be sure, wealthier economies will feel the effects. Higher fuel prices will intensify inflationary pressures already weighing on households in Europe and North America. Governments confronting slowing growth and persistent cost-of-living concerns will face renewed political pressure as transportation, electricity and food prices rise once again.
But the effects will be far more severe in the Global South.
Many developing economies remain deeply dependent on imported fuel, imported fertiliser and imported food. Energy shocks, therefore, cascade through entire economies. Transport costs rise. Agricultural production becomes more expensive. Food inflation accelerates. Public finances deteriorate as governments try to shield populations from rising prices through subsidies or emergency support.
This dynamic is already visible. Across several import-dependent countries in Africa and South Asia, governments are scrambling to secure alternative fuel supplies while confronting worsening fiscal pressures. The longer the uncertainty around the Strait of Hormuz continues, the greater the likelihood that inflationary shocks will deepen existing debt crises and social instability.
Indeed, the global economy remains extraordinarily vulnerable to narrow geopolitical chokepoints. The Strait of Hormuz is not simply a regional waterway; it is one of the central arteries of global capitalism. When it becomes militarised or partially blocked, the consequences reverberate worldwide within days.
Food prices are especially sensitive to these disruptions because energy markets and food systems are tightly interconnected. Fertiliser production depends heavily on natural gas. Shipping and refrigeration costs depend on oil prices. When energy markets are destabilised, grocery bills rise almost everywhere.
This is why the current negotiations matter so profoundly.
The issue is not only whether the US and Iran can avoid further military escalation. It is also whether a fragile global economy already strained by debt, climate shocks and geopolitical fragmentation can withstand another prolonged energy disruption.
Recent years have demonstrated how quickly such shocks become political crises. Food inflation played a major role in unrest preceding the Arab uprisings more than a decade ago. More recently, rising living costs have fuelled political volatility from Latin America to Europe. Governments across the world are already confronting widespread distrust, stagnant wages and growing inequality. Another sustained surge in energy and food prices could intensify these pressures dramatically.
The irony, once again, is that many of the countries likely to suffer most have little influence over the conflict itself.
The populations now facing the gravest economic risks are often those least responsible for the geopolitical confrontation, yet they are the ones most exposed to rising import costs, worsening hunger and shrinking fiscal space. The global economy repeatedly externalises the costs of major-power conflict onto poorer societies through commodity markets and debt structures.
Accordingly, reopening the Strait of Hormuz is not simply a matter of strategic stability for Washington or Tehran. It is also a global economic necessity.
This does not mean the negotiations will be easy. Deep disagreements remain over sanctions, uranium enrichment, regional security arrangements and the future governance of shipping through the Gulf. Reports also indicate continuing tensions over who would ultimately control transit through the Strait of Hormuz and under what conditions.
Nor is there any guarantee that a ceasefire would hold. Previous rounds of negotiations have repeatedly stalled amid renewed military escalation and mutual distrust.
Yet the alternative is increasingly dangerous.
A prolonged disruption in the Strait of Hormuz would not remain a regional crisis for long. It would deepen inflation, worsen food insecurity, strain humanitarian systems and increase the likelihood of broader political instability across vulnerable economies already under immense pressure.
In that sense, the negotiations now under way are about far more than diplomacy between the US and Iran. They are about whether the world can avoid another cascading global crisis driven by energy insecurity, geopolitical fragmentation and rising inequality.
The Strait of Hormuz cannot remain closed – economically or politically – without consequences for everyone.
The views expressed in this article are the author’s own and do not necessarily reflect media’s editorial stance.
