UN Says Hormuz Disruption Threatens Long-Term Food and Fuel Prices for Vulnerable Nations
UNCTAD Report Highlights Ongoing Risks from Strait of Hormuz Disruption
Immediate Relief for Energy Markets, Lingering Risks for Vulnerable Economies
GENEVA, June 30 (Reuters) - The U.N. trade and development agency warned on Tuesday that while the reopening of the Strait of Hormuz will bring immediate relief to energy markets, vulnerable economies remain at risk from prolonged increases in food and fuel costs.
Supply Chain Recovery and Market Impact
Food and Transport Systems Face Delayed Recovery
Food and transport systems are likely to take longer than energy markets to recover, as disrupted supply chains need more time to reset following more than 100 days of severe disruption to shipping through the strategic waterway, a U.N. Conference on Trade and Development said in a new report.
Extent of the Disruption
The strait, which normally carries about one-fifth of global oil and gas supplies, was effectively paralysed during the conflict triggered by joint U.S.-Israeli strikes on Iran in late February.
Economic Consequences and Price Shocks
Energy Prices and Household Budgets
Although Brent crude has fallen sharply back to around $73 a barrel, close to pre-conflict levels, following the interim U.S.-Iran agreement, UNCTAD said higher fuel, gas and fertiliser costs could continue to feed through into agricultural production, transport costs and household budgets.
Vulnerable Economies and Food Security
Vulnerable economies remain particularly exposed to oil and fertiliser price shocks, while persistently high food prices could place further pressure on poorer households. UNCTAD said a 5% increase in food prices can significantly raise the risk of childhood wasting.
Countries Most at Risk
The agency identified 61 vulnerable economies exposed to oil and cereal import shocks linked to the Strait of Hormuz disruption. Among them is Cape Verde, which relies heavily on imported fuel and has experienced rising electricity, transport and food costs that could continue even after energy markets stabilise.
Call for International Support
Staple food-importing countries such as Yemen also remain highly vulnerable because their fragile economies are ill-equipped to absorb higher grain prices and transport costs. UNCTAD called for international support to help the most exposed countries recover from the recent shocks.
(Reporting by Olivia Le Poidevin;)
