Alkis Otto and Max Johns assess economic impact of Strait of Hormuz blockade; Global energy prices rise, German inflation climbs

Alkis Otto and Max Johns assess economic impact of Strait of Hormuz blockade; Global energy prices rise, German inflation climbs

The Strait of Hormuz: A Bottleneck Threatening Trade, Energy and Markets

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The Strait of Hormuz: A Bottleneck Threatening Trade, Energy and Markets

Our HSBA professors Alkis Otto and Max Johns assess the economic consequences of an escalation in the Iran conflict.

The Strait of Hormuz is one of the key arteries of the global energy supply. Before the outbreak of the Iran conflict, up to 20 million barrels of oil were transported through the strait every day – around a fifth of global oil trade. Added to this is around a fifth of global trade in liquefied natural gas (LNG).

What impact is the current blockade having on the German economy, and what specific consequences could this have for consumers? We spoke to our experts, Prof. Dr Alkis Otto and Prof. Dr Max Johns, about this:

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.

Alkis H. Ottohas been Professor of Economics at the HSBA Hamburg School of Business Administration since 2010 and served as Vice-President for Teaching and Learning from 2020 to 2024.

From 2006 to 2018, he worked at the Hamburg Institute of International Economics (HWWI), where he headed the ‘Hamburg, Cities and Regions’ research division for four years. Since 2018, Professor Otto has been teaching and conducting research full-time at the HSBA.

His research focuses on labour economics, migration, and urban and real estate economics.

Dirk Max Johnsis Professor of Maritime Management, Programme Director of the MSc in Innovation Management and Head of the Hamburg Maritime Institute. He has been Vice-President for Teaching and Didactics since June 2024 and previously served as Vice-President for Research and International Affairs for three years.

In addition to his teaching and research activities at HSBA, he served as Managing Director of the VDR (Association of German Shipowners) until 2019, where he represented the interests of German shipowners in national and international bodies.

In the field of Maritime Management, Professor Johns focuses on the economic implications of ship financing, social issues and the impact of the financial crisis on the maritime industry.