The European Central Bank has warned that any major disruption to shipping through the Strait of Hormuz could have consequences far beyond energy markets, threatening global supply chains, fuelling inflation and putting as much as 3% of euro area production at risk in a severe scenario.
In a blog post published on Wednesday, ECB economists Pablo Aguilar, Lukas Boeckelmann and Antoine Kornprobst said that while tensions in the Middle East have eased, the Strait of Hormuz remains one of the world’s most critical chokepoints for global trade.
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A Risk That Extends Beyond Oil
A disruption to energy exports from the Gulf would not only drive oil prices higher but could also interrupt supplies of petrochemicals and other industrial inputs, the ECB said. If countries were unable to rely on strategic reserves or quickly replace lost imports, shortages could spread through global supply chains, weighing on economic growth while adding to inflationary pressures.
That risk extends beyond energy itself. Fertilisers, aluminium, petrochemicals, helium and methanol produced in the Gulf are critical inputs for industries ranging from semiconductors to aerospace and manufacturing, meaning disruptions could ripple through production networks well beyond the region.
Asia Faces The Greatest Exposure
The ECB said Asian economies would be hit hardest because of their dependence on Gulf energy supplies. More than half of energy imports in Japan, South Korea and India come from Gulf producers, while the share is about one-third in China and ASEAN economies.
The euro area is considerably less exposed, with Gulf imports accounting for roughly 10% of its energy supply. Even so, European manufacturers remain vulnerable through global supply chains, particularly in industries that depend on components and raw materials processed in Asia.
Severe Scenarios Point To Significant Losses
The ECB modelled two disruption scenarios: one involving only energy exports and another extending shortages to industrial goods.
Under the most severe assumptions, production could fall by as much as 11% in South Korea, around 8% in India, 7% in Japan and up to 5% across ASEAN economies. In the euro area, output could decline by as much as 3% if businesses were unable to replace disrupted supplies.
The outlook improves significantly if firms can source alternative imports. In that case, the ECB estimates euro area production losses would be limited to 0.4% under an energy-only disruption and 0.6% under the broader scenario.
Why It Matters
Although the likelihood of such a severe disruption has diminished as regional tensions have eased, the ECB argues that the analysis highlights a broader vulnerability in the global economy.
Modern supply chains mean geopolitical shocks no longer affect only the countries directly involved. Interruptions to a handful of critical trade routes or industrial inputs can quickly spread across manufacturing networks, increasing inflationary pressures and slowing economic activity far beyond the Middle East.
For policymakers and businesses alike, the ECB says the findings underline the importance of strategic reserves, diversified supply chains and contingency planning for industries that depend on critical imports.
