Global merchandise trade growth is expected to slow sharply from about 4.7% in 2025 to 1.5-2.5% in 2026 due to disruptions in cargo transit through the Strait of Hormuz, according to a forecast by UN Trade and Development (UNCTD) in its rapid assessment of the US-Israel-Iran war situation in the Gulf region.

“The Strait of Hormuz remains virtually closed, with effects spreading through the global economy within weeks by disrupting energy flows, raising prices, and increasing financial pressure on developing countries. What began as a disruption in a key energy corridor is now feeding through the entire global economy,” the report said.

According to the UNCTAD assessment, ship transits through the Strait of Hormuz dropped from around 130 per day in February to just six in March - a collapse of about 95%. “The disruption is hitting a large share of global oil and gas supplies, with immediate consequences for production, trade, and consumption worldwide. It is also spilling over into transport systems, including maritime routes, air cargo, and port logistics,” it noted.

The report, which examines the growth and financial implications of the Gulf crisis, states that the disruptions may also slow global economic growth. It forecasts that annual GDP growth rates could decline from 4.2% in 2022 to 4.1% in 2026 for developing economies, while the impact could be sharper for developed economies, with growth slowing from 2.8% to 1.5% over the same period.

It also noted that the currencies of developing countries have started to weaken since the military escalation in the Gulf region. The percentage change in exchange rates against the US dollar between February 27 and March 26 was -2.9% for Africa, -2.3% for Latin America and the Caribbean, and -1% for developing Asia and Oceania.

The report suggests a range of policy measures that governments can adopt to reduce the economic impact. It recommends a policy mix to stabilise price levels amid rising inflationary pressures, particularly for vulnerable populations. It also calls for measures to contain the transmission of systemic risks across energy, trade, and finance.

Enabling rapid access to external financing for developing countries - for essential imports and debt servicing - through emergency assistance, debt relief, central bank currency swap agreements, and regional financial support is another key recommendation. Additionally, empowering development banks to provide emergency loans and encouraging bilateral creditors to suspend debt servicing could offer crucial relief to developing nations.