Gulf supply disruptions risk global growth, inflation
A new ECB blog post uses scenario-based analyses to show that supply shortages from Gulf trade disruptions can affect global growth and inflation beyond the direct impact on energy prices. The analysis highlights the vulnerability of the global economy to such events.
Asia's concentrated exposure
The Strait of Hormuz remains a key chokepoint for global energy supply, with potential disruptions extending beyond energy prices to non-energy goods like petrochemicals and intermediate inputs.
Asian economies are most exposed to Gulf energy supplies, with Japan, South Korea, and India relying on Gulf suppliers for over 50 percent of their total energy imports, compared to around 10 percent for the euro area, UK, and US.
Energy-intensive industries such as petrochemicals, aluminium, fertilisers, and semiconductors are particularly vulnerable.
The ECB blog models two scenarios: a full disruption of energy goods exports and a broader disruption including industrial goods like fertilisers and helium.
These non-energy inputs, often difficult to substitute, could severely impact related sectors, especially in Asia, despite generally lower direct import exposure for advanced economies.
Quantifying the ripple effects
Quantifying these risks, a static multi-country, multi-sector trade framework shows Asian economies would face the largest production losses in an energy disruption scenario, with euro area losses reaching up to 3 percent.
The additional damage from non-energy goods in a broad disruption scenario is generally limited for advanced economies but more pronounced for India.
Dynamic simulations further reveal that physical disruptions amplify the impact on GDP and inflation, especially for China.
China's GDP growth could be 0.8 to 1.1 percentage points lower in 2026-2027, with inflation peaking at 2.3 percentage points.
The euro area would experience GDP growth reductions of 0.3 percentage points and inflation increases of 0.9 percentage points at peak, with inflation remaining persistently higher.
The hidden supply chain risks
The analysis effectively shifts focus from immediate energy price shocks to the systemic vulnerabilities within global supply chains.
While recent tensions have eased, the study underscores the critical need for proactive monitoring and robust contingency planning.
Ignoring these indirect dependencies risks underestimating the true macroeconomic costs of future geopolitical disruptions.