The Strait of Hormuz is one of the most strategic maritime passages in world trade, particularly for hydrocarbons. Episodes of tension there (attacks, threats of closure, sanctions, regional escalation) cause an immediate rise in uncertainty and volatility.
- However, this uncertainty is not confined to the energy sector: it spreads to financial markets as a whole, and also to the real economy through inflation, transport costs and supply chains.
This dynamic has its roots in the law of the sea: commercial shipping operates in a space governed by distinct legal regimes (notably the territorial sea, the exclusive economic zone (EEZ) and the high seas). The high seas, which are in principle open to international navigation, do not, however, eliminate geopolitical risks, as these often materialise in areas close to coastlines, straits and unavoidable shipping routes.
Straits used for international navigation are of great legal and economic importance, since they concentrate flows and make trade dependent on the security of sea lanes. So when a strategic passage becomes unstable, this is not merely a geopolitical event but a potential disruption to a maritime corridor whose continuity is essential to global trade.
From this perspective, the agri-food sector, reputedly “defensive”, can also be affected, notably by rising input costs (energy, fertilisers) and logistics costs (freight, insurance, delays).
The central question therefore becomes: how does an event occurring in the Strait of Hormuz feed through to the markets, and what strategies can reduce exposure to this volatility?
I The Strait of Hormuz: a nerve centre of trade and a source of “risk premium”
The Strait of Hormuz is a “chokepoint”: a narrow passage, difficult to bypass in the short term, through which very large volumes of goods transit, especially energy products. Its strategic value stems not only from its geographical extent but also from its position: it links major production regions with global consumption centres.
As a result, the mere possibility of disruption is enough to unsettle markets.
From a logistical standpoint, navigating a high-risk area also leads to higher marine insurance costs, security measures and sometimes rerouting (longer routes), all of which increase the cost of transport. Even when shipping continues as normal, the various transport and trade players factor in the risk, which can push prices up.
Not all events have the same economic significance; a distinction can be drawn between localised incidents, explicit threats of blockade or military escalation, economic sanctions or trade restrictions that alter routes and volumes, and informational episodes (rumours, diplomatic signals) that move prices without any immediate physical shock.
This distinction is essential: there is a difference between actual disruption of flows (a real supply shock) and an increase in perceived risk (a confidence shock). Markets often react to the latter before the former has even materialised, which explains rapid and sometimes reversible movements.
The first observable reaction is generally a rise in volatility: market participants adjust their expectations and hedge. In commodities, this translates into a higher “geopolitical premium” built into oil prices. In financial markets, it triggers a risk-off move (flight to quality), leading investors to reallocate towards assets deemed safer.
Indeed, a shock in Hormuz can affect not only oil prices but also energy-exposed equity sectors, the currencies of importing and/or exporting countries, and inflation expectations. In other words, Hormuz acts as a trigger for reallocation within portfolios.
II Transmission to the oil market and financial assets: prices, volatility, inflation
In the oil market, an event in Hormuz acts first and foremost as a supply-shock risk: if flows slow down, the supply-demand balance tightens and prices rise.
Even without any actual interruption, the threat alone is enough to push prices up, as fund managers price in a probability of disruption.
- In the short term, the reaction is often abrupt: a rise in Brent, higher implied volatility and sometimes a change in the futures term structure (near-dated prices rise faster than longer-dated ones if immediate tightness is anticipated).
- In the medium term, the effect depends on how long the crisis lasts and on the possible responses: release of strategic stocks, production adjustments by certain countries, partial substitution with other energy sources. But these adjustments are neither instantaneous nor unlimited, leaving a period during which the market remains “nervous”.
A rise in oil prices is rarely an isolated shock: it feeds through to production and transport costs, and then to inflation. This inflation can in turn influence monetary policy (interest rates raised or kept high), which weighs on certain financial assets.
The macroeconomic channel therefore links geopolitical tension, more expensive energy, inflation, rates/financial conditions and asset valuations.
In this context, equity markets may correct, especially if the energy shock is interpreted as negative for growth. Energy-intensive sectors (transport, heavy industry, chemicals, retail) see their margins come under pressure, while energy producers may benefit from higher prices (albeit with heightened political risk).
Beyond equities, a shock in Hormuz can affect not only bonds (impact on real and nominal rates), but also currencies and credit (indebted companies that are sensitive to energy costs).
It therefore becomes clear that the “general” impact on the market is first and foremost a matter of risk repricing and a shift in market regime (more volatility, higher risk premia), and not simply a question of oil.
III Effects on the agri-food sector: inputs, logistics, food prices and margins
The agri-food sector is heavily dependent on energy. On the one hand, agriculture uses fuel (machinery, on-farm transport, irrigation). On the other, the food-processing industry consumes energy to process, package, preserve (cold chain) and distribute.
As a result, a sustained rise in oil prices drives these costs up.
A crucial point concerns fertilisers, whose cost is linked to energy (particularly natural gas). If a geopolitical shock leads to a general rise in energy costs, fertilisers may become more expensive, which feeds through to agricultural production costs, then to agricultural commodity prices and, ultimately, to certain food prices.
The agri-food sector is also vulnerable to international logistics. A high-risk maritime zone often means higher insurance premiums, additional delays and rising freight costs… This matters particularly for goods with long supply chains, for perishable products, and for countries that import a significant share of their food and agricultural input needs.
- So, even though Hormuz is not an “agri-food” strait, it can affect the sector through higher transport and energy costs.
At company level, the key issue becomes the ability to absorb or pass on rising costs, known as “pricing power”. Some agri-food companies can protect their margins thanks to strong brands or relatively inelastic demand, while others, more exposed to price competition, may suffer more.
For agricultural commodities, the effect may be indirect but real: if input and transport costs rise, agricultural price volatility may increase. The agri-food sector is therefore not always a “safe haven”: it may be defensive in terms of demand, but fragile in terms of costs.
IV Strategies to reduce Hormuz-related risk
The aim is to avoid losses from a general market downturn (equity risk), losses from inflation (erosion of the purchasing power of real returns), losses from rising costs (energy-sensitive companies) and excessive volatility (timing risk).
- Indeed, the priority is hedging against volatility over the medium/long term.
Tensions in a strategic strait affect the economy through one very important channel: dependence on hydrocarbons (prices and supply). The alternatives therefore involve favouring, in sector analysis, business models that consume less fossil energy, replace imported energy with domestic energy and shorten supply chains.
- Renewables (solar, wind, hydro) rely on local resources and therefore reduce exposure to geopolitical shocks on oil routes. In the short term, they do not eliminate dependence (intermittency, grid requirements), but they change the risk profile of the energy system over the medium/long term.
It is also possible to replace fossil-fuel uses (transport, heating, certain processes) with electricity in order to reduce this transmission; this is known as the electrification of end uses.
One strategy for reducing dependence is what is known as energy efficiency (energy sufficiency, renovation, industrial optimisation): it is the most immediate alternative, since it relies on reducing consumption.
Storage and flexibility also have a role to play, through batteries and demand management: these solutions reduce the impact of peaks and price spikes and make the integration of renewables more stable; they thus indirectly help to reduce sensitivity to an oil crisis.
Other alternatives relating to transport and logistics rely on diversifying routes and suppliers, since vulnerability stems from concentration. A resilience strategy involves multiplying options: raw material suppliers, logistics hubs, shipping routes, contracts… Reshoring, or regionalisation (“nearshoring”), makes it possible to shorten the chain and thus reduce exposure to straits and to freight/insurance costs.
From a resilience perspective, a “dual-lever” approach combining phosphate and nuclear power can be proposed: on the one hand, securing agricultural production through strategic management of phosphorus (a key input), and on the other, reducing macroeconomic vulnerability to oil shocks by relying on largely decarbonised, dispatchable electricity. The link between phosphate and nuclear power is indirect but real: certain phosphate rocks naturally contain traces of uranium (sometimes thorium too), which in some industrial contexts has led to uranium recovery as a by-product of processing being considered or put into practice. This possibility thus illustrates the idea of integrated resource use and diversified supply.
The relevance of nuclear power to an analysis of the Strait of Hormuz lies in its systemic role. By providing domestic, stable, low-carbon electricity generation, nuclear energy supports the electrification of many sectors, such as transport, heating, industry and the agri-food cold chain.
The combination of a more secure supply of agricultural inputs, notably through phosphates and circular resource management, and an energy mix less dependent on imported hydrocarbons, of which nuclear power can be an essential pillar, therefore makes it possible to reduce structural dependence on the main strategic chokepoints of the oil trade.
Moreover, technological progress and the emergence of private players in the space sector are opening up new prospects: projects linked to the exploitation of extraterrestrial resources (metals found on certain asteroids or materials available on the Moon) raise important questions. Although the 1967 Outer Space Treaty prohibits national appropriation of celestial bodies, debate nevertheless continues over the regime applicable to resources that might be extracted, while the Artemis Accords demonstrate a genuine willingness to regulate these activities.
A question therefore arises: if tomorrow’s economies managed to produce part of their energy or raw materials from space resources, would we see a gradual reduction in dependence on strategic chokepoints on Earth, or would this instead shift relationships of dependence towards new dominant players, or simply move geopolitical rivalries into a new arena of competition?
Photo by Planet Volumes on Unsplash
Sources:
United Nations Convention on the Law of the Sea, https://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf
“New pipelines will bring significant volumes of natural gas to new LNG export terminals”, U.S. Energy Information Administration, 2023, https://www.eia.gov/todayinenergy/detail.php?id=61062
“Commodity Markets Outlook”, World Bank, https://www.worldbank.org/en/research/commodity-markets
“Review of Maritime Transport 2024”, United Nations Conference on Trade and Development (UNCTAD), 2024, https://unctad.org/publication/review-maritime-transport-2024
“Nuclear Power and Secure Energy Transitions”, International Energy Agency (IEA), 2022, https://www.iea.org/reports/nuclear-power-and-secure-energy-transitions
“Uranium Production”, International Atomic Energy Agency (IAEA), https://www.iaea.org/topics/uranium-production
Artemis Accords, Cambridge University Press, International Legal Materials, https://www.cambridge.org/core/journals/international-legal-materials/article/artemis-accords/5874DB518591888E52CF2B816E4593F0
Artemis Accords, National Aeronautics and Space Administration (NASA), https://www.nasa.gov/artemis-accords/
“Solar cells made of Moon dust could power up a lunar base”, Nature, 2025, https://www.nature.com/articles/d41586-025-00971-x
“The Artemis Moon base project is legally dubious”, The Verge, 2026, https://www.theverge.com/science/905406/artemis-ii-moon-base-law
“How Rising Geopolitical Risks Weigh on Asset Prices”, International Monetary Fund (IMF), 2025, https://www.imf.org/en/blogs/articles/2025/04/14/how-rising-geopolitical-risks-weigh-on-asset-prices
