World War Trade and the Strait of Hormuz

Key Takeaways

• Iran closed Strait of Hormuz, first full closure in modern history
• US and China normalized trade weaponisation in 2025, reshaping global commerce
• Middle powers consider tolls on chokepoints, signaling shift toward shipping weaponisation
• Fragmented regional trade blocs may replace monolithic WTO system
• Keeping shipping lanes open is vital to prevent systemic economic instability

Pulse Analysis

The Strait of Hormuz has long been the lifeline of global oil flows, and its complete shutdown in 2026 sent shockwaves through markets and policy circles alike. Baldwin frames the event as the latest manifestation of a broader "World War Trade" paradigm, where the United States and China have turned tariffs, export controls, and rare‑earth restrictions into instruments of coercion. This escalation blurs the line between economic competition and outright conflict, raising the stakes for any nation that relies on maritime trade routes for energy and raw materials.

Middle powers are now forced to confront a new strategic calculus. Indonesia’s brief flirtation with a toll on the Strait of Malacca illustrates how countries may seek to monetize chokepoints as a deterrent or revenue source. Such moves could fragment the previously rules‑based system, encouraging a patchwork of bilateral or regional agreements that prioritize security over liberal trade. The risk is a cascade of decentralized deterrence measures that make the global shipping environment more fragile and increase the probability of miscalculation.

The broader implication is a potential re‑ordering of the post‑World‑II trade architecture. While the WTO and multilateral institutions remain pillars of the system, their influence may wane as regional blocs like the EU and CPTPP become primary anchors of predictability. Maintaining open, neutral shipping lanes is essential to prevent a slide back into "jungle law" where economic might dictates access. Policymakers must therefore reinforce international maritime norms and develop collective responses to any attempts at weaponising trade routes, ensuring that global commerce remains a conduit for prosperity rather than a battlefield.