What is the economic significance of the Strait of Hormuz for global trade – and for Germany in particular?
Alkis Otto: The Strait of Hormuz is of particular importance for supplying Asian economies with oil and liquefied natural gas. At first glance, therefore, the blockade does not appear to have such a strong impact on Europe’s supply of energy commodities. However, the commodity markets are globally interconnected, meaning that the Asian countries now directly affected are looking for alternative supplies on the world market, so that prices for energy commodities are rising there too. We are therefore indirectly affected after all. Furthermore, around a third of global trade in fertilisers for agriculture must pass through the Strait of Hormuz. The full extent of the consequences for agriculture and for the global food supply is not yet clear.
Will the closure of the strait lead to rising prices in Germany?
Alkis Otto: Yes, and we are already seeing this. The rate of inflation in Germany has risen in recent weeks and stood at 2.7 per cent in March. In February, it was still 1.9 per cent. This can be attributed to rising energy prices. What’s more, it is not just petrol and heating oil that could continue to become more expensive.
Germany also sources numerous goods and intermediate products from other regions of the world, not least from the Asian countries already mentioned. If production costs there now rise due to higher energy costs, imported products and intermediate goods will also become more expensive, which will be reflected in production costs and thus in the prices of goods manufactured in Germany.
We must also fear that food prices could rise in future. The war in Ukraine has shown where this can lead, as it also resulted in more expensive energy and agricultural imports. At its peak, we saw inflation rates of almost 9 per cent in some months of 2022. Hopefully, it will not come to that this time.
Could this lead to long-term consequences for the economy?
Alkis Otto: That is the major concern. Global rises in energy prices have often led to global recessions in the past. The oil crises of the 1970s and 1980s are examples of this. Oil prices had also risen sharply prior to the global financial crisis of 2008/2009. The German economy has been in recession since the war in Ukraine anyway, a situation that was actually expected to resolve itself this year – partly due to the demand stimulus from the special fund. However, the Ministry for Economic Affairs has already halved its growth forecasts for the German economy for the current year.
What does the current situation mean for the shipping industry?
Max Johns: The situation is dramatic – and it affects far more than just the shipping industry. We need to consider the human, economic and geopolitical consequences together.
Seafarers are the ones most directly affected. Up to 20,000 people found themselves in a war zone practically overnight – with no real alternative. For them, it is not about supply chains, but about safety and, in the worst case, their lives.
Economically, we are seeing a paradoxical picture: whilst individual shipping companies are benefiting in the short term from skyrocketing freight rates, the system as a whole is coming under pressure. Key trade routes are disrupted, schedules are being scrapped daily, and risks are being reassessed. This is leading to massive uncertainty and rising costs – which ultimately end up being borne by all of us.
The most explosive aspect, however, is the political dimension. Free passage through straits is one of the fundamental rules of the global order. If this principle is now being called into question, more is at stake than just a regional conflict. Should Iran begin to levy fees for the Strait of Hormuz, this could set a dangerous precedent. Other players are already standing by: the Houthis in the Red Sea, Indonesia in the Strait of Malacca – and China, too, is likely to be watching very closely to see what opportunities arise.
What we are seeing here is, at its core, a test case: will the seas remain a global commons – or will they increasingly become an instrument of geopolitical power politics and selfish individual interests?
How are shipping companies responding to the situation?
Max Johns: German shipping companies are responding very calmly and prioritising the safety of their seafarers above all else. We must not forget that most shipping companies are still not sailing through the Suez Canal again, as the threat posed by the Houthi terrorists remains unpredictable.
