The Hormuz Crisis and the Fate of the Global South

Why It Matters

The crisis shows that energy‑system design, not just trade balances, determines economic resilience, and it intensifies pressure to channel windfall revenues into consumer relief and climate‑friendly investment.

Key Takeaways

• Hormuz closure cut 25% of oil, 20% LNG, 33% fertilizer flows.
• Spain's renewables cut gas‑price exposure from 75% to 19% since 2019.
• Brazil’s ethanol blend limited gasoline price rise to 5% versus US 30%.
• China’s 40% renewable electricity and 1.2 bn barrel reserves shield growth.
• Windfall‑profit taxes can fund subsidies and sovereign‑wealth green investments.

Pulse Analysis

The Hormuz bottleneck illustrates how geopolitical chokepoints can reverberate through the entire global economy. By choking off about 25 % of world oil, 20 % of liquefied natural gas and a third of fertilizer exports, the disruption has pushed commodity prices to multi‑year highs and forced central banks in emerging markets to tighten already scarce policy space. The International Monetary Fund warns that the shock is “asymmetric,” hitting import‑reliant nations in Asia, Africa and Eastern Europe hardest, where higher bond spreads and credit downgrades threaten fiscal stability.

Yet the same shock highlights a growing divide between countries that have diversified their energy mix and those that remain fossil‑fuel dependent. Spain’s aggressive wind‑solar rollout slashed the share of gas‑priced electricity hours from 75 % in 2019 to just 19 % in 2025, keeping wholesale power at €60‑70/MWh (≈$70‑$78) versus over €150/MWh in Germany and Italy. Brazil’s flexible‑fuel fleet and sugarcane‑based ethanol limited gasoline price hikes to 5 % in March, far below the 30 % surge in the United States. China’s 40 % renewable electricity share and 1.2 billion‑barrel strategic reserve have cushioned its growth outlook, underscoring how long‑term clean‑energy investments act as economic shields.

The policy response now centers on converting temporary windfall profits into durable resilience. European finance ministers are championing windfall‑profit taxes, arguing that the proceeds should fund short‑term subsidies for vulnerable households and long‑term green‑investment vehicles. Sovereign‑wealth funds in Malaysia, Indonesia and Senegal are already earmarking billions of dollars for renewable‑energy projects, creating a template for other resource‑rich nations. By channeling these revenues into biofuel expansion, storage infrastructure and climate‑smart industrialisation, governments can mitigate the current crisis while accelerating the transition that will protect future generations from similar shocks.