The Strait of Hormuz Reopens, but Will Confidence Return? The Long-Term Economic Cost of Geopolitical Risks

The functioning of the global economy depends to a large extent on the continuity of energy flows. Any disruption to energy supply can have consequences that affect not only the country concerned but the entire global economy. For this reason, the concept of energy security has today become a strategic field that bridges national security, economic stability and international politics. In this context, the Strait of Hormuz stands out as one of the most critical chokepoints in the global energy system.

Connecting the Gulf of Basra to the Gulf of Oman and the Indian Ocean, the Strait of Hormuz is a strategic chokepoint through which approximately one-fifth of the world’s oil trade passes. Any crisis in this strait, which is of vital importance for energy-producing countries such as Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Iraq and Iran in terms of their access to global markets, leads to significant volatility in energy markets. Recent escalating tensions in the region and discussions regarding the potential closure of the Strait of Hormuz have once again highlighted just how fragile the energy markets are.

However, there is one important point that is often overlooked by the public. The reopening of the Strait of Hormuz does not mean that economic problems will be resolved immediately. This is because energy markets are shaped not only by physical oil flows but also by expectations, perceptions and geopolitical risks. Therefore, the resumption of tanker traffic following the reopening of the strait does not mean that lost market confidence will return at the same pace.

In the formation of prices in international energy markets, the risk premium is another factor as important as supply and demand. The risk premium can be defined as the economic cost of potential future adverse developments being reflected in today’s prices. Crises in regions that are particularly sensitive from a geopolitical perspective have a direct impact on energy prices. A similar situation applies in the case of the Strait of Hormuz. Even if the reopening of the Strait technically restarts the flow of oil, investors, energy companies and insurance organisations will continue to factor in the possibility of a new closure.

One of the most significant consequences of this situation is seen in insurance costs. During periods of crisis, tanker insurance premiums and war risk premiums rise significantly. It takes time for these costs to return to their previous levels once the crisis has ended. This is because insurance companies factor in not only the current situation but also risks that may arise in the future. Similarly, maritime transport companies are also reviewing their operational planning, developing alternative routes and facing additional costs in the process.

From the perspective of energy security literature, the debate surrounding the Strait of Hormuz also reveals significant implications. In the past, energy security was largely regarded as synonymous with supply security. In other words, the physical availability of energy resources was deemed sufficient. However, today the concept of energy security is addressed within a much broader framework. The uninterrupted, cost-effective, accessible and predictable nature of energy also features amongst the fundamental elements of energy security.

When assessed from this perspective, whilst the opening of the Strait of Hormuz represents a positive development in terms of supply security, it does not entirely eliminate the problems arising in other dimensions of energy security. In particular, it is not possible to speak of energy security in the full sense of the term as long as price volatility and market uncertainty persist. Indeed, the energy crises experienced in recent years have demonstrated that price shocks can seriously affect countries’ economic performance, even in the absence of physical supply disruptions.

The effects of the Strait of Hormuz crisis are not limited to the energy sector alone. In the global economy, energy prices operate like a mechanism that triggers a chain reaction. Increases in oil and natural gas prices drive up transport costs, make production processes more expensive and, consequently, heighten inflationary pressures. This situation directly affects central banks’ monetary policies, potentially leading to higher interest rates and a slowdown in economic growth.

This process is particularly sensitive for countries dependent on energy imports. Major energy consumers such as European countries, Japan, South Korea and China are heavily reliant on energy resources transported via the Strait of Hormuz. Consequently, any crisis in the region affects not only energy supply but also industrial production, foreign trade balances and economic growth performance.

In fact, developments surrounding the Strait of Hormuz demonstrate that energy security is not merely a matter for energy policies. Energy security also lies at the heart of the geopolitical power struggle. In recent years, the intensifying competition between major powers has further heightened the importance of energy corridors and strategic chokepoints. Critical points such as the Strait of Hormuz, the Strait of Bab el-Mandeb, the Suez Canal and the Strait of Malacca are now not merely trade routes but have also become key elements in the global power struggle.

This situation is becoming even more complex alongside the energy transition process. Whilst, on the one hand, countries are striving to move away from fossil fuels, on the other, efforts to safeguard energy security continue. Although the acceleration of renewable energy investments, the proliferation of electric vehicles and the growing interest in clean energy technologies may appear to have diminished the strategic importance of oil, the current reality is different. The global economy still relies heavily on the consumption of oil and natural gas. Consequently, the importance of critical energy chokepoints such as the Strait of Hormuz will persist in the short and medium term.

From Turkey’s perspective, developments in the Strait of Hormuz must be closely monitored. Although Turkey is not a country directly dependent on the Strait of Hormuz, it is an integral part of global energy markets. Rises in oil prices increase Turkey’s energy import bill, widen the current account deficit and exert additional pressure on inflation. Particularly when one considers the decisive role that energy costs play in production processes, the impact of fluctuations in global energy markets on the Turkish economy becomes clearer.

In recent years, Black Sea natural gas, investments in renewable energy and policies aimed at diversifying energy sources have yielded significant gains for Turkey’s energy security. However, it is not possible to remain entirely immune to the effects of geopolitical shocks in global energy markets. For this reason, energy security policies must focus not only on diversifying supply sources but also on managing geopolitical risks.

In conclusion, the reopening of the Strait of Hormuz can be regarded as a significant and positive development. However, it would be unrealistic to expect this development to provide immediate economic relief. Energy markets depend not only on physical flows but also on expectations and the climate of confidence. In an environment where geopolitical risks persist, the strait being open is not sufficient in itself. Tankers may resume movement within a few days; however, rebuilding the lost trust will require a much longer process.

In today’s world, energy security is no longer measured solely by the availability of oil, but by the sustainability of energy flows, market stability and geopolitical predictability. The example of the Strait of Hormuz offers important lessons for understanding the new paradigm of energy security. This is because what the global economy requires is not merely an open sea route, but also a stable and predictable international security environment.