The unequal costs of a global trade disruption

The Strait of Hormuz, connecting the Persian Gulf to the Indian Ocean, caries a substantial share of global oil and liquefied natural gas flows. A disruption to shipping through the strait, whether from conflict or geopolitical pressure – does not stay regional. The shock spreads through global value chains, raising energy prices, squeezing producers of energy-intensive goods, and suppressing demand. What are the real impacts on countries, sectors, and workers worldwide? A shock with uneven consequences A recent brief covering 80 countries finds that, in 61 of them, more than 90 percent of workers experience a decline in real income, yet the burden falls very unevenly. Cambodia, Ukraine, and Vietnam are among the hardest hit. Oil-exporting countries: Nigeria, Angola, Australia, Brunei Darussalam, Kazakhstan, Norway, and the Russian Federation, are relatively insulated, with fewer than 20 percent of their workers made worse off. Across sectors, textiles, agriculture, and plastics take the hardest hit, while oil extraction is one of the few that benefits Higher energy prices ripple through production costs, and weakening global demand compounds the damage for export-oriented industries not closely tied to energy, such as electronics in China or textiles in Cambodia. Source: Policy Brief “Responding to the Global Shock from the War in the Middle East.” Calculations by Erhan Artuc and Bob Rijkers (as of April 2026) based on the DECRG Trade Policy Simulator. Who bears the costs within a country? Aggregate figures like GDP mask how unevenly costs fall within the same economy. Workers in the most negatively affected sector lose roughly 7.5 percent of their real income on average, and the gap between the most- and least- affected sector within the same country is approximately 30 percentage points. A policymaker relying on a single national headline number would miss most of what matters. The inability of workers to move quickly from contracting to expanding sectors – account for roughly 14 percent of total welfare loss, and the problem is worse in developing economies where mobility is more constrained. Agriculture: a sector under particular pressure The agriculture sector is especially exposed. Because it relies heavily on energy-intensive inputs such as chemicals and fertilizers, higher energy prices translate quickly into higher production costs. Agriculture workers face some of the largest income losses in many European countries, including Switzerland, Germany, France, Estonia, and Romania, as well as in Argentina and Israel. The distributional consequences extend to consumers as agriculture prices rise approximately 2 percent in non-high-income countries versus close to zero in high-income ones. For households that spend a larger share of their budgets on food, that difference is significant. From analysis to policy These findings draw on a quantitative trade toolkit that incorporates input-output linkages, labor market frictions, tariffs, and trade costs. A detailed explanation of the model, along with links to implementation in multiple programming languages, is included in this paper. A web-based version that requires no specialized programming knowledge is also freely available for researchers, government officials, and practitioners. It is part of a broader initiative within the Development Research Group to make interactive, user-friendly visualization tools widely available. Three findings stand out for policymakers: 1. Labor market flexibility matters enormously: economies that make it easier for workers to move across sectors absorb the same external shock with significantly less harm. Investing in retraining, portable benefits, and reduced hiring and firing costs is a form of trade resilience. 2. Food price inflation in lower-income countries warrants preemptive attention: two-percentage-point rise in agriculture prices may look modest in aggregate, but for households spending the majority of their income on food, it is not. Governments in food-import-dependent economies should consider whether existing subsidy- or transfer- mechanisms can respond quickly when energy prices spike. 3. Sector-level data should drive the response: a policymaker looking only at GDP would miss the 30-percentage-point gap in income losses between the most- and least-affected sectors within the same economy. As trade disruptions become more frequent and more consequential for developing countries, granular distributional analysis is not a technical luxury. It is a starting point for a policy response that actually reaches the workers who need it most.