Global merchandise trade is expected to slow sharply, from about 4.7% growth in 2025 to 1.5–2.5% in 2026 due to disruptions in cargo transit through the Strait of Hormuz, UN Trade and Development (UNCTAD) forecasts in its rapid assessment of the US-Israel and 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’, it says.

According to UNCTAD assessment, ship transits through Strait of Hormuz dropped from around 130 per day in February to just 6 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 notes.

The report, which looks into the growth and financial implications of the Gulf crisis, says that the disruptions may slow down global economic growth too. It forecasts annual growth rates of GDP in percent could slow down from 4.2% (in 2022) to 4.1% (in 2026) for developing economies while the impacted could be sharper – from 2.8% to 1.5% -  for the developed economies during the same period.

It also notes 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 US $ during February 27 – March 26 has been -2.9% for the Africa region, -2.3% for Latin America and Caribbean economies and -1% for Developing Asia and Oceania economies.

The report suggests a list of policy initiatives governments can adopt to reduce the impact on economies. It wants the governments to consider a policy mix to stabilize price levels as inflation pressures rise, particularly for vulnerable populations. It suggests implementation of measures to contain transmission of systemic risks across energy, trade, and finance. Enabling rapid access to external financing for developing countries for essential imports and debt servicing, potentially through emergency assistance, debt relief, central bank currency swap agreements, and regional financial assistance is another UNCTAD suggestion. Empowering development banks to provide emergency loans and bilateral creditors suspending debt service to provide crucial relief to developing nations can also help, it says.