Morgan Stanley: The Weekly Worldview — Second-Order Effects of Oil Shocks
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Morgan Stanley examines the second-order economic effects stemming from the sustained Strait of Hormuz disruption. As the blockade extends into its second week, oil production is beginning to shut down due to storage constraints. Even if the strait reopens, normalizing operations will require several weeks.
Beyond energy markets, the Middle East is a critical supplier of aluminum, petrochemicals, and fertilizers—sectors that are highly energy-intensive and deeply embedded in global supply chains. Energy disruptions could trigger downstream material shortages that persist well beyond the conflict itself, as post-conflict recovery will prioritize restoring oil and LNG flows over industrial capacity.
Morgan Stanley estimates that over USD 15 billion of aluminum trade, approximately 8% of the global total, is at risk. Around USD 26 billion of plastics trade, representing 9% of global volumes, is exposed, with China, India, Turkey, and Egypt most vulnerable. Additionally, roughly USD 5 billion of sulfur and sulfuric acid trade faces disruption, threatening fertilizer supply chains.
Covered countries import over USD 12 billion of fertilizers from the Middle East, accounting for more than 16% of global trade and exceeding 25% for certain nitrogen products. Emerging markets including India, Brazil, Turkey, and South Africa face the greatest exposure, but developed economies are also impacted, with Japan, South Korea, Italy, and the US each sourcing at least 10% of aluminum imports from the region. These cascading effects amplify macro risks beyond energy.