Poor Economies Have Long Path To Recovery Even After Hormuz Reopening, UN Warns

The reopening of the Strait of Hormuz has removed concerns of energy shortages globally, but the aftermath of the crisis will be felt for months, especially by vulnerable economies, according to a report by the United Nations Conference on Trade and Development (UNCTAD).

Though oil prices have declined to pre-war levels, the shipping operations, logistics, supply chains and inventory cycles would need some time to adjust, meaning transportation costs will remain high even as crude prices decline.

The shock extends beyond oil and natural gas markets, as low-income countries face inflation which threatens food security and incomes amidst economic instability.

As food prices respond more slowly than the energy sector, several countries will face increasing costs of living, which will affect poor-income households the most, leading to malnutrition, diseases and health issues.

Nations which solely depend on fuel, food and fertiliser imports would be impacted, given the limited financial resources and dependence on external supplies, which would leave them with fewer options but to bear the high import costs.

UNCTAD warned that a continued increase in food prices could have serious consequences in low-income countries, which would need financial assistance to restore price stability.

The report highlights how a geopolitical conflict in one part of the world could evolve into a wider development and public welfare issue across the globe.

The pace of recovery would depend on the normalisation of shipping routes, stabilisation of energy supplies and international support for poor economies.

Without these conditions, the results of Hormuz closure could outlast the war itself, prolonging inflation and slowing economic growth across some of the world’s poorest nations.

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