Prolonged Hormuz Strait Closure Could Trigger Global Recession

Jakarta — A prolonged closure of the Strait of Hormuz, a critical cross-border fuel distribution corridor, as a consequence of the escalating conflict between Israel and Iran, is assessed to have potentially significant impacts on triggering a global recession.

“A prolonged closure of the Strait of Hormuz will cause a global recession,” said Bob McNally, former energy adviser to the 41st President of the United States and founder of Rapidan Energy, as quoted by CNBC.

A global recession represents a period of significant and simultaneous decline in economic activity across many countries worldwide, characterised by economic contraction, increased unemployment, and reduced consumer purchasing power.

Bhima Yudhistira, Executive Director of the Centre of Economic and Law Studies (Celios), cautioned that the potential for global recession has increased amid the escalation of the Iran-United States conflict and soaring global energy prices.

“A global recession has the potential to occur in the near term,” Bhima told Kompas.com on Monday, 2 March 2026.

“The VIX index has already risen 52 per cent since the start of 2026. The higher the volatility index, the greater the risk of economic shocks,” he stated.

According to him, the Iran-United States conflict is triggering serious disruptions to global oil and gas supplies. Rapid and excessive increases in energy prices risk creating substantial pressure on the supply side.

“Rapidly rising and excessively high oil prices create shocks on the supply side. The recession transmission channel runs through imported inflation,” said Bhima.

“Currency weakness combined with rising oil and food prices creates a lethal combination for weakening purchasing power,” he added.

On another front, Bhima also highlighted the potential for a market bubble to burst. According to him, there is a disconnect between slowdown in the real economy and stock market rallies, particularly in the technology sector.

“At the same time, a market bubble could burst because there is growing desynchronisation between economic slowdown and the technology stock rally,” he stressed.

Geographically, the Strait of Hormuz connects the Persian Gulf with the Indian Ocean. This narrow passage, with depths of less than 60 metres, is surrounded by several islands controlled by Iran, including Hormuz, Qeshm, and Larak.