Maritime chokepoints and the global economy: evidence from the Strait of Hormuz

The conflict in the Middle East and the subsequent disruption of traffic in the Strait of Hormuz have triggered an unprecedented shock to the global economy. Using historical data from the IMF/University of Oxford Portwatch database on maritime traffic, this paper empirically examines some of the potential economic and financial consequences of disruptions to traffic in the Strait of Hormuz. The analysis highlights the role of this chokepoint as a global supply indicator, with traffic disruptions acting as a global stagflation-inducing force. While commodity prices — especially energy prices — tend to increase after an adverse shock to traffic in the Strait of Hormuz, such negative shocks are systematically followed by a combination of lower global output and higher global consumer prices. In addition, negative shocks to traffic in the Strait of Hormuz tighten financial conditions, with spreads on both advanced economies (AEs) corporate bonds and emerging market economies (EMEs) sovereign bonds widening significantly. These findings underscore the Strait of Hormuz’s critical role in the global economy and highlight avenues for future research on chokepoint shocks.