Hormuz: UN warns small businesses face extinction as trade route collapses

Small and medium-sized enterprises (SMEs) worldwide risk being permanently shut out of global supply chains as the fallout from disruptions in the Strait of Hormuz deepens, the United Nations Conference on Trade and Development (UNCTAD) has warned.

The Strait is a chokepoint that normally carries about a fifth of global seaborne oil.

In a new report, “Smaller Firms, Greater Risks,” UNCTAD said transit through the strait has collapsed by more than 95 per cent since disruptions tied to the Iran-related conflict began, sending oil prices toward $100 a barrel and driving up freight, insurance and financing costs across the board.

While large corporations can absorb the shock by spreading risk across multiple suppliers, markets and financiers, UNCTAD said, smaller firms typically cannot.

The agency warned this could trigger what it called an “SME exclusion effect,” where smaller companies are forced to scale back production, delay investment or exit supply chains altogether even after trade volumes eventually recover.

SMEs account for roughly 90 per cent of businesses worldwide, about 70 per cent of employment and half of global GDP, according to the report, making their vulnerability a systemic risk rather than a niche concern.

UN Spokesperson Stéphane Dujarric, said the Security Council has weighed in on the crisis, noting “the Council has issued a resolution on this matter” as the world body pushes to restore freedom of navigation through the waterway.