Trump’s Blockade of Hormuz Strait to Have Severe Economic Implications

Lightning occurs when META 4, an Oil Products Tanker, sails into Muscat Anchorage on March 21, 2026 at Sultan Qaboos Port in Muscat, Oman (Getty)
Lightning occurs when META 4, an Oil Products Tanker, sails into Muscat Anchorage on March 21, 2026 at Sultan Qaboos Port in Muscat, Oman (Getty)
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Trump’s Blockade of Hormuz Strait to Have Severe Economic Implications

Lightning occurs when META 4, an Oil Products Tanker, sails into Muscat Anchorage on March 21, 2026 at Sultan Qaboos Port in Muscat, Oman (Getty)
Lightning occurs when META 4, an Oil Products Tanker, sails into Muscat Anchorage on March 21, 2026 at Sultan Qaboos Port in Muscat, Oman (Getty)

The global economy enters a new stage of uncertainty as the US Central Command (CENTCOM) said American forces began implementing a blockade of maritime traffic entering and exiting Iranian ports.

US President Donald Trump ordered the naval blockade after marathon peace talks with Iran in Islamabad, collapsed last week.

While the President’s decision aims to strangle the Iranian economy, it acts as a profound shock to the global economy and has far-reaching consequences that severely destabilize markets in East Asia and Europe.

Over the weekend, US Vice President JD Vance told reporters in Islamabad that negotiations with Iran on an end to hostilities have failed to result in a deal. Shortly after, Trump ordered the embargo on the strait with hoped that he can apply to Iran the model of his intervention in Venezuela, where the US seized then-president Nicolás Maduro in a military operation after a naval blockade of the Latin American nation.

“We’re putting on a complete blockade. We’re not going to let Iran make money on selling oil to people that they like, and not people that they don’t like, or whatever it is,” Trump told Fox News on Sunday.

“You saw what we did with Venezuela. It’ll be something very similar to that, but at a higher level.”

Direct Threat to Energy Stability

Analysts say the naval embargo risks further destabilizing global energy markets and triggering a new surge in oil prices.

Jennifer Kavanagh, military analysis director of Defense Priorities, a Washington think tank on restrained force, told the Financial Times that Trump appears to feel frustrated about his options for the war.

“Closing the strait entirely will spike oil prices even more than they did before, and put more pressure on the US from the international community,” Kavanagh said.

“It definitely shows how frustrated and at the end of his options the president feels,” she added.

Her comments came as OPEC issued its Monthly Oil Market Report.

It said OPEC crude oil production plummeted by approximately 7.87 million barrels per day (bpd) in March 2026 compared to February 2026, primarily due to the US-Israeli conflict with Iran which has largely closed the Strait of Hormuz.

OPEC's total output stood at about 20.7 million bpd, according to the group's latest Monthly Oil Market Report. The steepest production declines were recorded in Iraq, where crude output dropped by roughly 2.5 million bpd to about 1.63 million bpd.

Implication for Oil Flows

Blocking Iranian shipments would disconnect a significant source of oil from the world's markets, according to Reuters.

Iran exported 1.84 million barrels per day (bpd) of crude in March and has shipped 1.71 million bpd thus far in April, compared with a full-year average of 1.68 million bpd in 2025, according to Kpler data.

However, a surge in Iranian output before the war started on February 28 has led to near-record levels of Iranian oil loaded on ships, with more than 180 million barrels floating as of earlier this ⁠month, according to Kpler data.

“The US quarantine of Iran's ports will cost Iran about $435 million a day in economic damage,” Miad Maleki, a former official with the Treasury Department's Office of Foreign Assets Control, said.

The estimated losses include about $276 million in lost exports, mainly crude oil and petrochemicals.

He explained that the blockade would result in the disruption of imports worth nearly $159 million daily, amounting to monthly losses estimated at around $13 billion.

Data indicates that Iran’s heavy reliance on southern shipping lanes leaves its economy exposed to maritime disruption, with more than 90% of its $109.7 billion annual trade passing through the Strait of Hormuz, while oil and gas constitute approximately 80% of government export revenues and nearly 23.7% of GDP.

From Energy to Food

While the Strait of Hormuz closure has acutely touched hydrocarbon markets, it will also affect food safety as it coincides with spring planting across hundreds of millions of acres of global cropland.

Therefore, turning the Strait into a military zone creates an immediate and severe crisis in global agricultural supply chains, severing the flow of key petrochemicals and nitrogen-based fertilizers.

Urea spot prices at the US Gulf Coast approached $700 per metric ton (up over 30% from the start of the war), and dealers in major importing markets began limiting sales. Urea is a nitrogen fertilizer that increases the yields of many crops, especially staple grains like corn, rice, and wheat.

Also, transforming the Strait from a free-trade artery into a conflict zone under military control, forces major companies to reroute shipping, leading to significantly higher operational costs, “imported inflation,” and severe logistical bottlenecks that conventional monetary policies struggle to address.

The blockade also initiates strategic risks as disruption of fertilizers comes precisely during the Northern Hemisphere's spring planting season, when demand peaks.

Furthermore, the implications extend to the costs of food logistics. Even crops produced far from the conflict zone will be affected by an increase of shipping and insurance prices, adding significant costs along the supply chain.

Inflation

The Strait of Hormuz blockade represents the trigger of a transboundary inflation driven by supply-side constraints that traditional monetary policy tools cannot easily mitigate.

Surging maritime insurance premiums alongside forced route diversions away from the Red Sea and Gulf, have caused global logistics costs and freight rates to soar.

The blockade has shifted the global economy to a phase of “imported inflation” which represents a dilemma for major central banks, as a shock rise in the cost of some goods will depress household purchasing power, causing consumers to cut back on spending, which in turn puts downward pressure on other goods and services and leads to the risk of “stagflation.”

China in the Crosshairs

The blockade also risks drawing the world’s second-largest economy into the confrontation. China remains Iran’s largest oil buyer and has continued to receive shipments through the strait since the war began, analysts say.

A blanket ban on tankers carrying Iranian crude threatens to cut off that supply, potentially reigniting US tensions with Beijing ahead of Trump’s planned trip to China next month.

The Trump administration on Monday also threatened to impose an additional 50% tariff on China if Beijing supplies advanced defense equipment to Tehran.



Saudi Energy Minister Says Kingdom Remains Reliable, Flexible Supplier

Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman al-Saud attends the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 4, 2026. (Photo by Olga MALTSEVA / AFP)
Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman al-Saud attends the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 4, 2026. (Photo by Olga MALTSEVA / AFP)
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Saudi Energy Minister Says Kingdom Remains Reliable, Flexible Supplier

Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman al-Saud attends the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 4, 2026. (Photo by Olga MALTSEVA / AFP)
Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman al-Saud attends the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 4, 2026. (Photo by Olga MALTSEVA / AFP)

Saudi Energy Minister Prince Abdulaziz bin Salman seized the spotlight at a high-level dialogue session held during the 2026 St. Petersburg International Economic Forum, breaking a strategic silence that had become a focus of questions and a gauge for global market expectations.

Speaking on Thursday, he delivered carefully calibrated messages to the energy sector, stressing that the world urgently needs stability in energy markets and declaring with confidence that the Kingdom is a flexible energy supplier, was, and will remain so under all circumstances.

In his remarks during a special session at the forum, where the Kingdom is taking part as “main guest of honor” as the two countries mark the centenary of diplomatic relations, Prince Abdulaziz acknowledged that current geopolitical events in the Middle East were distracting attention and obstructing focus on Saudi Arabia’s strategic priorities, foremost among them the goals of Vision 2030.

He described the situation as a source of considerable frustration.

Even so, he sent a strong message of reassurance to global markets, saying in a firm tone that it was their duty, and that of every Saudi citizen, to defy this difficult environment and continue to pursue their ambitions.

The Kingdom has the capability and confidence to address challenges and demonstrate its economic and operational resilience, he added.

He pointed to what he described as the success of Saudi Arabia’s infrastructure and logistics system in turning tragedies into opportunities, and in managing the Hajj season with unprecedented success despite the surrounding regional turmoil.

On the partnership with Moscow, the Saudi Energy Minister announced the signing of 30 new cooperation agreements between the private sectors in the two countries across fields including industry, education, tourism, and energy.

Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman al-Saud attends the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 4, 2026. (Photo by Olga MALTSEVA / AFP)

Prince Abdulaziz said the Kingdom will sign agreements across various fields and that there are no limits or restrictions on joint cooperation.

He added that the strategic mindset in Riyadh and Moscow had moved beyond being merely “producers of oil or gas” to “manufacturing and supplying energy in its comprehensive sense,” including hydrocarbons and the export of electrons.

In an explanation of his earlier position, which had kept oil traders on edge, Prince Abdulaziz said he had deliberately remained silent during the period that witnessed one of the most severe global energy crises.

A minister is required to maintain his composure and not panic, because panic makes a person lose control of the narrative, he explained.

He moved on to express his intention to maintain silence, because silence amid many unknowns is a message and a humble acknowledgment that reality is changing quickly, and is a form of respect for oneself and for others.

He concluded his assessment of current market conditions with a pointed remark reflecting the scale of uncertainty clouding the global scene.

“The situation we’re going through now does make a point here, which is the world needs every molecule of energy, and every form of stabilization to this energy, because without energy security, you will lose sustainability,” the Saudi minister said.

“There are so many moving parts, there are so many unknowns, there are things that you think have become a reality, but then you wake up in the next morning and the reality is no longer a reality.”

Novak says the market faces a 12 million barrel shortfall

For his part, Russian Deputy Prime Minister Alexander Novak described the current crisis in the international oil market as unprecedented, with no parallel even in the 20th century.

Novak said Russia would deal with the Western sanctions imposed on it with flexibility and complete calm, given its position as a key supplier of energy resources to the international market.

He warned of a large, hidden shortfall in global supply, estimated at about 12 million barrels per day that are currently not reaching the market.

He said global markets had not yet felt the full impact of the energy crisis caused by the Middle East conflict because the situation was being managed through withdrawals from surplus reserve inventories.

Novak cautioned that if the conflict continues and Gulf states delay increasing production, the market will face an acute and immediate physical shortage of supplies within a few months.

In his analysis of the producers’ alliance, Novak stressed that the OPEC+ agreement remains a key driver of energy market direction.

He said its members control more than 50% of global production and more than 40% of total exports, adding that the agreements have proven highly efficient at curbing volatility and reducing market fluctuations.

Novak said current data gave countries an opportunity to accelerate compliance, describing the existing approach as a “standard and normal course” that allows countries that had previously exceeded their quotas for any reason to implement compensation plans for their earlier overproduction more quickly.

On Russia, Novak said technical analytical calculations to determine Russia’s maximum production ceiling are continuing in cooperation with the companies concerned, and would be discussed with partners by the end of 2026.

He expected Moscow to effectively reach its assigned production levels this year under the agreed quotas, despite current output being slightly lower than at the start of the year because several refineries were undergoing “emergency and unscheduled maintenance.”

Expectations of strong demand

OPEC Secretary General Haitham Al Ghais said the organization expects robust oil demand growth and would not change its estimates despite the conflict in the Middle East and the closure of the Strait of Hormuz.

“Despite all the commentary out ⁠there that oil demand is declining, we have not registered signs of that yet,” Al Ghais said.

“We still see robust demand growth at 1.2 million barrels a day for this year,” he said.

He also said investment in the oil sector should not be affected by "one-off events" that may occur anywhere in the world.

Egyptian Minister of Petroleum and Mineral Resources Karim Badawi told the session that renewable energy is a top priority to reduce dependence on natural gas. He said Egypt is working hard to increase electricity generation from wind and hydropower to secure a sustainable energy mix.

Markets hold their breath before the Sunday marathon

The remarks made at the forum on Thursday carry major significance as a prelude and practical indicator of the direction of leading producers ahead of decisive oil-related meetings next Sunday.

That day will see three consecutive meetings, beginning with OPEC’s administrative conference, followed by the 66th meeting of the Joint Ministerial Monitoring Committee, or JMMC, which is responsible for monitoring compliance levels, consensus, and the approval of current compensation plans.

Investors are closely watching the 41st ministerial meeting of the OPEC+ alliance. Informed sources said the alliance is likely to approve an additional gradual increase in its targets for next July.


OPEC Secretary General: Oil Demand to Remain Robust, No Change to Estimates

OPEC Secretary General Haitham Al Ghais attends the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 4, 2026. (Photo by Olga MALTSEVA / AFP)
OPEC Secretary General Haitham Al Ghais attends the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 4, 2026. (Photo by Olga MALTSEVA / AFP)
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OPEC Secretary General: Oil Demand to Remain Robust, No Change to Estimates

OPEC Secretary General Haitham Al Ghais attends the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 4, 2026. (Photo by Olga MALTSEVA / AFP)
OPEC Secretary General Haitham Al Ghais attends the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 4, 2026. (Photo by Olga MALTSEVA / AFP)

OPEC expects robust oil demand growth and is not changing its estimates, Secretary General Haitham Al Ghais said on Thursday at the St. Petersburg International Economic Forum, despite the Middle East conflict and closure of the ⁠Strait of Hormuz.

"Despite ⁠all the commentary out there that oil demand is declining, we have not registered signs of that yet," ⁠Reuters quoted Al Ghais as saying.

"We still see robust demand growth at 1.2 million barrels a day for this year," he said.

He also said that investments in the oil industry should not be affected by "one-off events" that happen ⁠anywhere ⁠in the world.

"We need to invest well ahead of time to be prepared for the demand that we see in the future," he said.


Egypt Plans to List More State-owned Companies, Replace In-kind Subsidies with Cash

Headquarters of the Central Bank of Egypt in downtown Cairo (Asharq Al-Awsat)
Headquarters of the Central Bank of Egypt in downtown Cairo (Asharq Al-Awsat)
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Egypt Plans to List More State-owned Companies, Replace In-kind Subsidies with Cash

Headquarters of the Central Bank of Egypt in downtown Cairo (Asharq Al-Awsat)
Headquarters of the Central Bank of Egypt in downtown Cairo (Asharq Al-Awsat)

Egypt aims to list four to five state-owned companies on the Cairo stock exchange before the end of the year as part of its state asset sales strategy, Prime Minister Mostafa Madbouly said on Thursday.

The government also plans to shift from in-kind subsidies to cash subsidies during the coming financial year, as part of efforts to improve the targeting of social support, Madbouly said at a press conference, Reuters reported.

It does not aim to reduce the monetary value of subsidies but rather ensure they reach those entitled to receive them, he added.

More than 60 million people receive subsidised essential commodities through state-run outlets, while at least 10 million others benefit from subsidised bread.