Leading companies in the global energy trading sector have warned that the continued closure of the Strait of Hormuz is negatively impacting fuel demand, thereby increasing the risk of a global recession.

This vital energy channel has largely been closed to vessels from outside Iran since the onset of the war at the end of February, resulting in the disruption of hundreds of millions of barrels of supply. Consumer countries are depleting their emergency buffer stocks held for such situations to cover this shortfall. Petrochemical producers in China, Japan, and South Korea have restricted their operations.

Production of plastics, used in everything from bottles to electric appliances, has decreased. Airlines in many countries, from Vietnam to the Netherlands, are canceling flights or preparing emergency plans in this direction. Across Southeast Asia, rice fields that are ready for harvest are left fallow due to rising fuel and fertilizer costs.

While international forecasters have already acknowledged that the conflict is weakening economic growth and oil demand, trading institutions such as Vitol Group, Gunvor Group, and Trafigura Group have stated that the situation will worsen if the Strait of Hormuz does not reopen soon. Vitol Group CEO Russell Hardy pointed out at the FT Commodities Global Summit in Lausanne that stocks are being drawn from various sources. 'We borrowed supply. But you can't do this forever. There are recessionary consequences of having to restrict this demand,' he said.

Hardy noted that the war has so far eliminated approximately 4 million barrels of daily demand, and this figure will increase if the Strait of Hormuz remains closed. Frederic Lasserre, head of research at Gunvor, also predicted at the same event that a three-month closure of the strait could lead to a global recession. According to Trafigura Group, although the impact on consumption has so far been concentrated in Asia, it will spread as global prices react.

The institution's Chief Economist Saad Rahim stated at the event, 'People are underestimating the loss of supply. However, this loss needs to be balanced somewhere with a loss of demand,' and indicated that the prolongation of the crisis would mean a contraction in economic activity.

Source: SeaNews Türkiye