Strait of Hormuz disruption: How will it impact emerging markets?

• Less than 2 months’ disruption of the Strait of Hormuz could push average EM inflation higher by +0.8-1.0p with limited recessionary effects – apart from GCC countries. • As the conflict drags on, Asian economies could face supply disruptions on top of stronger inflationary shocks, given that 56% of their oil imports and 30% of their total gas imports originate from the Middle East. • Beyond three months of closure for the Strait of Hormuz, many more EM countries are at high recession risk as they run triple deficits (fiscal, current account, energy). • With energy-driven inflation risks...