Wars and Drought Threaten the Global Economy
The global economy faces successive challenges that are putting supply chains through unprecedented tests, driving up the prices of goods and services and raising inflation rates. Before the world had fully recovered from the repercussions of the Covid-19 pandemic, and the resulting closure of factories and ports as well as disruptions to sustained production and transport traffic, the Russia-Ukraine war broke out in early 2022, causing a rise in the prices of oil, gas, grain, fertilisers and other commodities on global markets. No sooner had the global economy begun to adapt to the complications of that war than the United States and "Israel" launched a war on Iran, disrupting shipping in the Strait of Hormuz, through which a fifth of global energy exports of oil and liquefied gas pass, along with agricultural fertilisers and other raw materials and petrochemicals.
While the repercussions of this war expanded to reach the Red Sea and the Bab el-Mandeb Strait, which form an alternative corridor for part of oil exports, particularly Saudi exports, shipping declined on the Danube and Rhine rivers, Europe's two most prominent arteries for inland waterway transport, due to a wave of drought hitting the Old Continent that reduced their water levels to lows unprecedented since records began in 1880. The negative repercussions of this drop are not confined to transport, as they also include electricity generation, particularly hydroelectric and nuclear power plants that require water from these rivers to cool their units. Meanwhile, the "El Niño phenomenon" threatens shipping in the Panama Canal in South America, amid declining rainfall rates and falling water levels.
The Russia-Ukraine War and Its Repercussions on Energy and Food Markets
The Russia-Ukraine war has caused, and continues to cause, disruptions in global economic supply chains, especially as it is being fought in regions that produce energy, namely oil and gas, as well as wheat and other food products, as a result of disrupted exports across the Black Sea, rising insurance and shipping costs, and the sanctions imposed on Russia, alongside a broad wave of market turmoil. In this context, the Food and Agriculture Organization of the United Nations confirms that this conflict has disrupted production, trade and markets.
The war forced Ukraine to adopt longer and costlier routes for its exports instead of Black Sea ports, while European markets were closed to Russian gas supplies after having relied on them for many years, pushing Europe to reshape its energy system, diversify import sources, and increase its reliance on seaborne liquefied natural gas. That helped ease those countries' dependence on a single source, but it left European energy security more closely tied to the safety of maritime corridors, particularly the Straits of Hormuz and Bab el-Mandeb and the Suez Canal.
The US-Israeli war on Iran has disrupted shipping in the Strait of Hormuz, which is described as "the most vital in the world", where more than 21 million barrels of oil and petroleum liquids used to pass per day, with that volume dropping to around 4.9 million barrels per day during the second quarter of 2026 as a result of Iranian threats to vessels crossing the strait without its approval. Alternative oil transport routes that bypass the Strait of Hormuz remain unable to bridge the gap created by its closure, as their combined capacity does not exceed 9 million barrels per day.
As for liquefied natural gas that used to pass through the Strait of Hormuz, its exports have fallen to their lowest levels in the absence of overland pipeline alternatives to maritime shipping; the "Dolphin" pipeline, for example, carries only limited quantities of Qatari gas, fully contracted to the United Arab Emirates and Oman.
The repercussions of disrupted shipping in the Strait of Hormuz are not confined to oil and gas; they also include trade in fertilisers, petrochemicals and raw materials produced by the Gulf states. This means that the energy shock will not remain restricted to fuel and electricity prices, but is bound to carry over into agriculture, industry and transport, and consequently into the prices of food and consumer goods.
The Houthis' targeting of shipping traffic in the Red Sea and the Bab el-Mandeb Strait has caught supply chains for energy and other strategic commodities in a pincer movement, generating an interconnected inflationary spiral, as higher energy prices drive up freight and insurance rates, factory operating costs rise, the prices of finished goods increase, and those burdens ultimately fall on the consumer.
Alongside wars, drought has emerged as an additional factor threatening production, trade and energy, as well as agriculture. During this summer, the wave of drought worsened across wide parts of Europe due to low precipitation and repeated waves of extreme heat, and water levels on the Rhine and Danube rivers, whose economic importance extends beyond the borders of the countries through which they flow, dropped to record lows.
The Rhine, for example, serves as a major artery for transporting coal, fuel, chemicals, grain and industrial products between European ports and manufacturing centres in Germany, France, the Netherlands and Switzerland. The Danube links Central and Eastern Europe to the Black Sea and plays an important role in transporting grain and raw materials. Falling water levels on the river neutralise one of the routes that had gained added importance to offset the disruption of Ukrainian exports across the Black Sea. Thus the effects of wars and drought intersect, disrupting seaports while drought limits the capacity of rivers to provide alternatives.
On the other side of the world, drought is once again threatening the Panama Canal, with a decision by the Canal Authority to reduce vessel traffic amid declining rainfall rates and lower levels of the water needed to operate the lock system, which relies on rainwater stored in the system of lakes within its basin, foremost among them Gatun Lake. This comes amid fears that the "El Niño" phenomenon could prolong pressures on one of the world's most important waterways.
The succession of crises facing the global economy makes solutions more complex and threatens the stability of societies, particularly fragile ones. The Russia-Ukraine war threatened supplies of energy, grain and fertilisers, the war on Iran disrupted flows of oil, gas, agricultural fertilisers and other goods through the Strait of Hormuz, and the spread of threats to Bab el-Mandeb narrowed the options for circumventing the crisis, while drought lowered water levels in Europe's rivers and threatened the Panama Canal, placing transport, agriculture and energy under simultaneous pressure.
Having once banked on fast, low-cost trade, the world has shifted its priorities to focus today on diversifying import sources and developing alternative infrastructure, particularly pipelines, railways and alternative ports. With wars continuing and extreme climatic phenomena worsening, the challenges will not be limited to how much oil or food prices rise, but will include the global economy's ability to sustain production and ensure the resilience and continuity of global supply chains.
Translated from Arabic with AI. Read it in Arabic