Developing countries face prolonged food, fuel price shock despite Hormuz reopening: UNCTAD

UNCTAD (UN Trade and Development) has warned that developing countries will face prolonged food and fuel price shocks even after the partial reopening of the...

What Happened

UNCTAD (UN Trade and Development) has warned that developing countries will face prolonged food and fuel price shocks even after the partial reopening of the Strait of Hormuz, as supply chains and freight contracts take far longer to normalise than the waterway itself.
The agency identified 61 vulnerable economies — including 35 least developed countries (LDCs) — with significant exposure to both oil and cereal import shocks resulting from the Hormuz disruption.
A mere 5% increase in real food prices is projected to raise child wasting risk by 15% among poor children and by 26% among rural landless poor households.
Global merchandise trade growth is expected to slow sharply from approximately 4.7% in 2025 to between 1.5% and 2.5% in 2026.
Higher energy costs are cascading into agricultural supply chains through elevated fertiliser and transportation costs, threatening domestic food prices and crop production across vulnerable nations.

Static Topic Bridges

Strait of Hormuz — Geography and Strategic Importance

The Strait of Hormuz is a narrow waterway between the Persian Gulf and the Gulf of Oman, bordered by Iran to the north and the Musandam Peninsula (Oman) to the south. It is approximately 104 miles long and narrows to about 24 miles at its widest navigable point. The strait is the single maritime outlet from the Persian Gulf, making it the world's most critical energy chokepoint. In 2024, flows through Hormuz accounted for more than one-quarter of total global seaborne oil trade and approximately one-fifth of total global oil and petroleum product consumption. Around one-fifth of global liquefied natural gas (LNG) trade also transited Hormuz in 2024, primarily from Qatar. India, China, Japan, and South Korea together accounted for 67% of all crude oil flows through the strait in 2022 and the first half of 2023.

Countries whose oil exports primarily transit Hormuz: Saudi Arabia, Iran, UAE, Kuwait, Iraq, Qatar, Bahrain
Alternative bypass capacity: Saudi Arabia and UAE have pipelines with a combined bypass capacity of approximately 3.5–5.5 million barrels/day — far below typical Hormuz daily volumes
India imports over 80% of its crude oil, making Hormuz disruptions directly relevant to India's energy security and import bill
Hormuz is one of seven globally recognised maritime chokepoints (others include Malacca, Bab-el-Mandeb, Suez Canal, Panama Canal, Danish Straits, and Cape of Good Hope)

Connection to this news: The Hormuz disruption triggered the price shock analysed in UNCTAD's report; even with partial reopening, freight and food supply chains remain stressed, hitting LDCs hardest.

UNCTAD — Mandate, Structure, and Relevance

UNCTAD (United Nations Conference on Trade and Development) was established in 1964 and is headquartered in Geneva. It functions as the principal organ of the UN General Assembly on trade, investment, and development issues, with a special focus on the interests of developing countries. UNCTAD publishes key annual reports including the Trade and Development Report (TDR) and the World Investment Report (WIR), and provides research, technical assistance, and intergovernmental consensus-building. It operates under the principle of "trade as an engine of growth and development," particularly for the Global South.

Founded: 1964; Headquartered in Geneva, Switzerland
Membership: 195 states
Key publications: Trade and Development Report (annual), World Investment Report (annual)
Distinct from WTO: UNCTAD focuses on development-oriented trade policy, not on enforcing trade rules
UNCTAD has a dedicated group classification system: Group A (Africa, Asia-Pacific), Group B (developed economies), Group C (Latin America & Caribbean), Group D (transition economies)

Connection to this news: UNCTAD's analysis provides the authoritative UN-system assessment of how Hormuz disruptions translate into food insecurity in LDCs and small island developing states.

Least Developed Countries (LDCs) and Vulnerability to External Shocks

The Least Developed Countries (LDCs) category was established by the UN General Assembly in 1971. Countries are classified as LDCs based on three criteria: low per capita income (GNI per capita below a threshold of ~$1,135), human assets weakness (nutrition, health, education indices), and economic and environmental vulnerability (export concentration, dependence on agriculture, exposure to natural disasters). There are currently 44 LDCs globally, mostly in Sub-Saharan Africa and South Asia. LDCs typically rely heavily on food and fuel imports while having limited foreign exchange reserves, narrow export bases, and fragile domestic supply chains — making them acutely vulnerable to external commodity price shocks.

LDC graduation criteria reviewed every three years by the Committee for Development Policy (CDP)
India has been a major development partner for LDCs through South-South cooperation (ITEC, Lines of Credit)
Bangladesh graduated from LDC status in 2026; Bhutan graduated in 2023
Small Island Developing States (SIDS) face a "dual shock" — dependent on both food and fuel imports, with no domestic agricultural buffer
UN Decade for LDCs: Third Programme of Action (PoA) for LDCs runs through 2031 (Doha Programme of Action, adopted 2022)

Connection to this news: Of the 61 vulnerable economies identified by UNCTAD, 35 are LDCs — their structural features (import dependence, thin forex reserves, food insecurity) make the Hormuz-linked price shock especially severe and prolonged.

Global Food Security Architecture and Price Shock Transmission

Food security, as defined by the 1996 World Food Summit, exists "when all people, at all times, have physical, social and economic access to sufficient, safe, and nutritious food." The four pillars are: availability, access, utilisation, and stability. Global food prices are tracked by the FAO Food Price Index (FFPI). Energy prices affect food prices through multiple channels: transportation costs, fertiliser prices (natural gas is the primary feedstock for nitrogen fertilisers), and mechanisation costs. The FAO and WFP use the Integrated Food Security Phase Classification (IPC) system to categorise food insecurity from Phase 1 (minimal) to Phase 5 (famine).

A 5% rise in real food prices → 15% increase in child wasting risk (poor children), 26% increase (rural landless poor)
Russia and Ukraine together accounted for about 30% of global wheat exports before the 2022 conflict; Hormuz disruptions add a second supply-side shock
Natural gas (via Hormuz) → fertiliser → food prices: the commodity linkage chain
FAO Food Price Index (FFPI): reference benchmark for global food commodity prices
Global merchandise trade growth forecast: ~4.7% (2025) → 1.5–2.5% (2026) per UNCTAD

Connection to this news: The Hormuz shock illustrates how energy and food systems are structurally linked — higher fuel costs raise fertiliser prices, which raise crop production costs, which raise food prices, which worsen child nutrition outcomes in LDCs.

Key Facts & Data

Strait of Hormuz handles: >25% of global seaborne oil trade; ~20% of global LNG trade
UNCTAD identified: 61 vulnerable economies exposed to dual oil and cereal import shocks
Of 61 vulnerable economies: 35 are Least Developed Countries (LDCs)
Child wasting risk increase per 5% food price rise: 15% (poor children); 26% (rural landless poor)
Global merchandise trade growth: ~4.7% (2025) → 1.5–2.5% (2026) — UNCTAD projection
UNCTAD founded: 1964; HQ: Geneva
Alternative Hormuz bypass pipeline capacity: ~3.5–5.5 million barrels/day (Saudi Arabia + UAE only)
Top destinations for Hormuz crude oil: China, India, Japan, South Korea (67% of flows combined)
LDC classification criteria: income, human assets, economic & environmental vulnerability (UN General Assembly, 1971)
Doha Programme of Action for LDCs: 2022–2031