A Stressful chokepoint: The significance of Hormuz today
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The conflict between Israel and Iran has turned the Strait of Hormuz into a high-risk area, impacting global oil and LNG flows and affecting Bangladesh's energy model. The country's reliance on imports and lack of buffers are turning far-off geopolitical shocks into imminent economic threats, with surging freight costs, rising insurance premiums, and higher energy prices.
The Strait of Hormuz is a critical energy corridor where nearly 20% of global oil and LNG flows through. Tensions between Israel and Iran have paralyzed this corridor, with tankers idle offshore and insurers retreating. Shipping traffic has decreased significantly, impacting global logistics. Freight costs from the Middle East to Asia have risen to $12 million per voyage. Bangladesh, heavily reliant on imports, faces surging freight costs and higher energy prices. The country's energy vulnerability is structural, due to years of relying on imported energy and slow progress toward renewable alternatives.
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