Rising global oil prices linked to disruptions in the Strait of Hormuz are placing increasing pressure on vulnerable economies, threatening to drive up import costs, fuel inflation, and strain public finances across some of the world’s poorest nations. The warning comes from a new report titled “Strait of Hormuz Disruptions: The Burden of Oil Price Shocks on Vulnerable Economies,” published as part of the United Nations Trade and Development (UNCTAD) monitoring series examining the economic consequences of disruptions affecting one of the world’s most critical energy corridors.
The latest edition focuses on Least Developed Countries (LDCs) and Small Island Developing States (SIDS), many of which depend heavily on imported fuel and have limited capacity to absorb external economic shocks.
Quoting 2024 statistics, the report said Uganda imported 61.5% of its petroleum products through the Strait of Hormuz, while neighbouring Tanzania imported 56% of its products through the same route.
The report builds on earlier UNCTAD analysis that warned disruptions in the Strait of Hormuz could trigger broader trade, food, transport, and financial shocks, underscoring the importance of early-warning systems and data monitoring to understand how such risks spread through the global economy. Although geopolitical tensions in the region may fluctuate, UNCTAD notes that their economic effects often persist long after immediate disruptions subside.
Before the latest disruptions, the Strait of Hormuz handled approximately one-fifth of global oil shipments. Since disruptions began on February 28, crude oil prices have risen sharply, increasing costs across transportation networks, supply chains, and energy markets worldwide. The impact is particularly severe for vulnerable economies. According to the report, 65 of the 75 vulnerable economies analyzed are net oil importers, with imports largely concentrated in refined petroleum products.
Together, these countries are home to nearly one billion people, more than 30 percent of whom live on less than US$3 per day. UNCTAD estimates that a sustained 50 percent increase in refined oil prices, based on current import levels, could raise the collective annual oil import bill of these economies by more than US$20 billion. Assuming import volumes remain at 2024 levels, Least Developed Countries would absorb approximately US$16 billion in additional costs, while Small Island Developing States would face an extra US$4 billion.
For some countries, the impact could exceed five percent of Gross Domestic Product (GDP). Mauritania could see costs equivalent to 7.3 percent of GDP, followed by The Gambia at 6.3 percent, Vanuatu at 5.8 percent, the Maldives at 5.2 percent, and Burkina Faso at 5 percent. UNCTAD warns that such increases could force governments to make difficult choices between financing essential imports and investing in critical development priorities.
Higher oil prices are also expected to increase transport and freight costs, accelerate inflation, reduce household purchasing power, place additional pressure on public budgets, and slow economic growth. The report highlights a broader challenge facing the global economy, where geopolitical tensions increasingly generate economic consequences that extend far beyond the immediate conflict zones. As uncertainty persists, UNCTAD says the key challenge is ensuring that countries with limited economic resilience can protect development gains while strengthening their ability to withstand future shocks-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
