The global economy is facing a 'domino effect' impact

The situation in the Middle East has escalated, and the U.S. and Israel's military actions against Iran have triggered severe disruptions in the global energy supply chain. As a crucial artery for global energy transportation, any obstruction of the Strait of Hormuz directly impacts the global oil, natural gas, and fertilizer markets. Its ripple effects are spreading from the energy sector to agriculture, manufacturing, shipping, and other real-economy sectors, forming a 'domino effect' economic crisis.

The Strait of Hormuz handles about 20 million barrels of crude oil daily, accounting for 20% of the world's seaborne oil. After Iran announced the blockade of the strait, international oil prices surged by 13% in a single day, and Brent crude futures broke $82 per barrel, hitting the highest level since January 2025. If the blockade continues for several weeks, the global oil supply gap could expand to 5 million barrels per day, potentially pushing oil prices above $130 per barrel and triggering a global energy crisis caused by a 'supply shock.'

Liquefied natural gas (LNG) transport is also affected. As the world's largest LNG exporter, Qatar has had its facilities shut down due to attacks, causing European natural gas prices to spike 40% in a single day, with a cumulative increase of 70% since last weekend. The suspension of production at Saudi Arabia's largest refinery and the closure of some oil fields in Iraq's Kurdish region are further reactions, which exacerbate global energy market panic.

The surge in energy prices quickly spreads to the agricultural sector. The Middle East is a major exporter of nitrogen and phosphate fertilizers, and disruptions in fertilizer production in countries such as Iran and Qatar have caused global fertilizer prices to soar. U.S. urea prices rose $70 per ton to $550 per ton in a single week, while major agricultural countries like Australia, Brazil, and India face severe supply shortages. India needs to import 2 million tons of fertilizer monthly, and costs are expected to rise by 30%-40%, directly increasing the cost of food production.

The manufacturing sector is also under pressure. Industries such as plastics, chemicals, and transportation heavily rely on petroleum derivatives; for every $10 increase in oil prices, global manufacturing costs rise by about 0.5%. Gas stations in Turkey's northwestern province of Kırklareli have seen long queues, with freight driver Ahmed Kush stating, 'The cost of every transport trip is increasing, and the prices of everything from bread to clothing will go up.' This cost transmission will ultimately be borne by consumers, forming a vicious 'energy-agriculture-consumption' cycle.

The blockade of the Strait of Hormuz has brought global shipping to a standstill. After the Red Sea routes were obstructed, freight costs between Asia and Europe increased by 40%, ships were forced to detour around the Cape of Good Hope, extending the journey by 15-20 days, and freight rates surged. The International Monetary Fund (IMF) warned that if the conflict continues, global trade volume could decrease by 12%, equivalent to a $1.2 trillion loss in trade value.

The insurance industry has also been severely hit. War risk insurance premiums for oil tankers rose by 300% in a single day, and for some routes, premiums even exceeded the value of the cargo. Malaysian olive oil industry regulators revealed that rising fertilizer prices might lead small-scale farmers to forgo fertilization, resulting in a drop in production capacity in the following months, further impacting the global food supply chain.

The conflict may accelerate the global energy transition process. Saudi Arabia plans to invest $45 billion to build the world's largest carbon-free green hydrogen plant, the UAE and Egypt are cooperating to develop a hydrogen supply chain, and Chinese companies such as Longi Green Energy and BYD are deploying photovoltaic and energy storage projects in the Middle East. Although these projects cannot temporarily make up for the oil supply gap, they will change the global energy landscape in the long term.

The escalation of the Middle East situation exposes the vulnerability of the global economy: energy supply chains are highly concentrated, agriculture is heavily dependent on fertilizers, and the shipping industry has insufficient risk resistance. If the conflict continues, global inflation may rise again, and economic growth faces the risk of 'stagflation.' The international community needs to accelerate energy diversification, establish alliances for strategic material reserves, and promote the diversification of trade routes to build a more resilient global economic 'firewall.' In this crisis, only cooperation and innovation can prevent a full collapse of the 'domino effect.'