Yemisi Izuora
The UN Trade and Development (UNCTAD) has said that the outcome from instability in the strategic shipping route caused by U.S, Israel and Iran war is already being felt far beyond the Middle East, reaching least developed countries, small island developing states and many African economies that are heavily dependent on imported fuel.
A disruption in the Strait of Hormuz emerged as a major economic threat for the world’s most vulnerable countries, with a new report from UN Trade department warning that higher oil prices could sharply raise import costs, worsen inflation and intensify food insecurity across dozens of developing economies.
Speaking in a television interview about the report with CNBC, Carlos Razo, chief of innovation and research at UN Trade and Development, said the fallout from instability in the strategic shipping route is already being felt far beyond the Middle East, reaching least developed countries, small island developing states and many African economies that are heavily dependent on imported fuel.
According to the UNCTAD report, 65 out of 75 vulnerable economies are net oil importers. That leaves nearly 1 billion people exposed to rising fuel costs and could add more than $20 billion to those countries’ annual import bills.
Razo said the price shock is particularly severe because many of the countries affected are already dealing with limited fiscal space, elevated debt burdens and declining official development assistance. In some cases, he said, the added cost of energy imports could amount to more than 5 per cent of current GDP, forcing governments to divert scarce resources simply to secure the same volume of oil they were previously buying.
“That includes small island developing states and the least developed countries,” Razo said, noting that these economies may have to absorb billions of dollars in extra import costs. “This is a complex situation for many of them which are already facing high debt burdens.”
The Strait of Hormuz, one of the world’s most critical energy chokepoints, handles a significant share of global oil and gas flows. Any disruption there can quickly feed into global benchmark prices, lifting costs for countries with little ability to hedge or switch suppliers. While energy-importing countries face the most immediate damage, the interview also highlighted how even oil-exporting countries may not be insulated.
Nigeria was cited as a prime example. Although the country stands to benefit from stronger crude prices as an exporter, Razo said those gains can be offset by the fact that Nigeria still imports large quantities of refined petroleum products. As refined fuel prices rise alongside crude, consumers may end up feeling only the pain at the pump rather than the benefit of improved export earnings.
“People might not feel the gains of the new export revenues, but they might feel the increasing prices in the oil and gas pumps,” he said.
That dynamic underscores a broader concern for African economies, many of which are represented heavily among the developing nations most exposed to commodity shocks. The interview focused at length on what African countries can do to better shield themselves from future volatility, and Razo repeatedly returned to one central theme: diversification.
For energy importers, that means diversifying energy sources away from dependence on oil where possible. For oil-producing countries, it means moving up the value chain rather than relying solely on crude exports. Razo said investments in refining capacity, as well as in broader energy infrastructure and renewables, could help countries retain more value domestically and reduce exposure to imported refined fuel.
The conversation comes as industrial investment in refining capacity in Africa, including expansion plans linked to Nigeria’s Dangote refinery and broader interest in downstream projects across the continent, is increasingly being viewed as part of a long-term resilience strategy. Razo said fragmented but sustained investment across oil, refining and renewable energy could provide a safer economic footing because future shocks are inevitable.
“I think diversification is always a good strategy to deal with current and future shocks,” he said. “We cannot guarantee that shocks will not happen.”
Beyond energy markets, UNCTAD is warning of second-round effects that could outlast the initial disruption. Razo said that even if trade flows through the Strait of Hormuz begin returning to normal, the ripple effects from the original price surge are already spreading through vulnerable economies. Inflation has already started to rise in some countries, including small island states in the Pacific that are geographically far removed from the Middle East but deeply exposed through import dependence.
That means normalization in shipping conditions may not quickly reverse the pressure on households. Higher fuel prices can feed directly into transport, electricity and agricultural costs, pushing up food prices and worsening living conditions for poorer communities. Razo emphasized that the crisis should not be seen purely through a macroeconomic lens.
“It is sometimes very easy to see this as an economic story, but it is, for most, a human story,” he said.
In practical terms, UNCTAD’s recommendations focus on short-term relief and social protection alongside longer-term structural reforms. Razo said governments should consider policy tools, including measures to control price pressures where feasible, while also strengthening support systems for vulnerable households facing steeper energy and food bills.
He also called on the international community to play a more active role in helping fragile economies cope with the shock. With borrowing conditions tight and aid flows weakening, many low-income countries have little room to respond on their own. Without external support, he warned, the energy shock could quickly morph into a broader humanitarian problem marked by food insecurity and deeper poverty.
Central banks around the world may also be forced to respond to inflationary spillovers, adding another layer of complexity to an already fragile global growth environment. But for the countries highlighted in the report, the immediate concern is more basic: how to finance essential fuel imports without sacrificing food security, social stability and long-term development goals.
The UNCTAD report ultimately paints a stark picture of how a geopolitical disruption in one of the world’s most important maritime corridors can cascade across distant economies with little warning. For vulnerable countries, the message is clear: energy dependence is becoming an increasingly costly risk, and the window to build resilience may be narrowing.