The restricted navigation through the Strait of Hormuz has triggered significant disruptions across the international shipping sector, driving up shipping costs and legal pressures related to shipping.
Iran has restricted navigation through the Strait of Hormuz, a vital strategic waterway linking the Persian Gulf to the Indian Ocean, as part of its response to U.S. and Israeli military attacks that started on Feb 28.
The partial blockade of this vital global energy route has not only impacted global energy supplies but also caused a ripple effect on energy trading, shipping operations, and the insurance market.
Wai Yue Loh, partner of DAC Beachcroft, and a specialist in shipping, trade, commodities and insurance law said he has been dealing with questions from shipping clients after the conflict in Iran broke out.
He said the commodities traders bear the brunt of Strait of Hormuz crisis and explained the interconnected vulnerabilities across the three industries most affected.
"It's easy to forget that the first industry directly affected would be the commodities traders who are buying and reselling crude oil coming out from the Middle East. Crude oil cargoes from this region account for about 25 percent or more of the world's crude oil supplies. The second industry affected would be the shipowners or the ship operators whose ships are chartered by these commodities traders, in simple terms hired by these commodity traders, to carry these cargoes from the Persian Gulf to refineries around the world for refining. These refined products are then on-sold to other buyers worldwide. The third would be the insurance industry that provides, amongst other things, war risk cover for ships that are trading globally," he said.
With the rising risks of war, shipping companies face not only security challenges but also complex legal issues such as rising insurance costs, increased uncertainty in contract performance, and the apportionment of liability, he added.
Hormuz Strait crisis delivers severe blow to global shipping industry
Hormuz Strait crisis delivers severe blow to global shipping industry
The escalating military conflict in the Middle East could bring severe economic consequences and job losses to the region which may plunge up to 4 million people into poverty, a United Nations spokesman has warned.
Stephane Dujarric, spokesperson for United Nations Secretary-General Antonio Guterres, outlined the growing concerns surrounding the deepening conflict during a regular press briefing on Tuesday.
Citing data released by the United Nations Development Programme (UNDP), Dujarric said the widening war could result in a devastating economic impact, which will have a profound effect on people's livelihoods.
"I wanted to flag some interesting data just released by the United Nations Development Programme that suggests the military escalation in the Middle East may cost economies in the region from 3.7 to 6 percent of their collective gross domestic product (GDP). This represents a staggering loss of 120 to 194 billion U.S. dollars and exceeds the cumulative regional GDP growth achieved in 2025. This is coupled with an estimated rise in unemployment of up to 4 percentage points or 3.6 million lost jobs, which is more than the total jobs created in the region last year. These reversals will push up to 4 million people into poverty, according to UNDP's analysis," he said.
The conflict erupted on Feb. 28 when the United States and Israeli launched joint airstrikes on the Iranian capital Tehran and several other cities. U.S-Israeli attacks have continued since, targeting key Iranian military command centers, missile installations, energy infrastructures and nuclear facilities.
In response, Iran has launched waves of missile and drone strikes against Israel and U.S. military facilities across the Middle East, including those in Kuwait, Bahrain, Qatar, Jordan, Saudi Arabia and the United Arab Emirates.
The situation shows little sign of de-escalation as Iranian Foreign Ministry spokesman Esmaeil Baghaei said on Monday that a recent truce plan proposed by the United States contains "very excessive, unrealistic and unreasonable" demands.
Wider concerns are also mounting over the disruption to trade and transport along the Strait of Hormuz, a vital shipping passageway that carries about one-quarter of global seaborne oil trade.
UN spokesman warns up to 4 million could be pushed into poverty by Mideast conflict
