Disruptions in the Strait of Hormuz threaten trade — Anadolu Agency
World Trade Organization Director-General Ngozi Okonjo-Iweala said on the sidelines of the WTO Public Forum in Geneva, Switzerland, that disruptions in the Strait of Hormuz have become the most serious disruption to global trade in 80 years. According to her, a prolonged blockage of this vital waterway could raise food and fertilizer prices.
As Anadolu Agency reports, the global trading system remains resilient, but the ongoing conflict in the Middle East is a serious test for the WTO's 166 members. Okonjo-Iweala noted that merchandise trade grew by 4.6% this year, while 72% of global trade continues to be conducted under the organization's rules.
Trade growth and supply chains
The WTO's initial forecast projected total merchandise trade growth of 1.9% for the year, while the figure stood at 3.2% in the first quarter. According to the WTO chief, a significant share of this growth was driven by active trade in artificial intelligence. It was stimulated by low- or zero-tariff agreements covering global supplies of semiconductors and chips worth $3 trillion.
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At the same time, Okonjo-Iweala urged caution in assessing the sustainability of this trend. She stressed that the economic benefits of this boom are concentrated mainly in North America and East Asia, raising concerns about the inclusiveness of the global market.
Oil and updating WTO rules
According to Okonjo-Iweala, national reserves have temporarily mitigated the effects of disruptions in the strait on markets. However, a prolonged blockage of the waterway will inevitably increase costs in agriculture. Previous WTO estimates indicated that an oil price of $90 per barrel could reduce trade growth by 0.5 percentage points, and current prices have already exceeded that threshold.
Shipping companies maintained trade volumes by rerouting vessels via alternative routes, but longer detours increase costs. Governments are preparing action plans in case of further disruptions at critical transport hubs. The WTO chief also stated the need to update global trade rules and involve developing countries in devising new approaches. A recent WTO report estimated that the breakdown of multilateral cooperation and the failure to modernize regulation could reduce up to 10% of potential global economic growth by 2050.
