A man walks along the shore as oil tankers and cargo ships line up in the Strait of Hormuz, seen from Khor Fakkan, United Arab Emirates, March 11. [AP]
February 28, 2026, will go down in the annals of economic history as the moment when the architecture of global trade, honed over decades to maximize cost efficiency, collapsed under the weight of an inescapable physical reality. What began as a regional conflict in the Middle East has morphed into a triple systemic shock: the effective closure of the Strait of Hormuz, instability in the Red Sea corridor, and major disruptions in the Gulf’s key logistics and aviation hubs. Today, the global economy is not just facing an energy crisis; it is being forced to confront the validation of the thesis that Tim Marshall popularized in his seminal work: we continue to be “prisoners of geography.”
Until very recently, the prevailing narrative held that technology and markets had overcome geography. In 2005, Thomas Friedman wrote that “the world is flat,” explaining that in the era of globalization, goods and ideas moved seamlessly across borders, enabling less developed countries to benefit from the progress of more advanced nations. Yet the 2026 crisis has demonstrated that globalization and supply chains remain constrained by physical bottlenecks.
The Strait of Hormuz is the ultimate example of this physical constraint. Barely 21 nautical miles wide at its narrowest point, this waterway handles approximately 20% of the world’s oil supply and about one-fifth of the global supply of liquefied natural gas. Following the escalation of the conflict, commercial traffic has collapsed almost entirely, reducing cargo flows to negligible levels and causing war risk insurance premiums for oil tanker voyages to skyrocket. Major shipping companies have been forced to reroute around the Cape of Good Hope due to the closure of the Gulf and the insecurity in the Red Sea, adding between 3,500 and 4,000 nautical miles to voyages between Asia and Europe and significantly increasing turnaround times. The main consequence is rising energy prices and, with them, widespread inflation, leading to increases in industrial prices and, ultimately, consumer goods prices. This effect is expected to intensify as the conflict drags on.
However, this disruption goes beyond prices and energy, affecting critical supplies such as semiconductor chemicals and fertilizers, threatening global technological and food security. The closure of the Strait of Hormuz has set a ticking clock for global food security, as a large proportion of the world’s fertilizers transit through the strait. Qatar is one of the world’s leading exporters of sulfur, an essential element for the production of phosphate fertilizers. Vulnerability is also a major issue in the technology sector. Taiwan, which produces the vast majority of the world’s cutting-edge chips, relies heavily on imports of liquefied natural gas from the Gulf, exposing its industry to disruptions along critical routes such as the Strait of Hormuz.
Meanwhile, the crisis is fueling a new wave of trade protectionism and the reterritorialization of the world, characterized by new tariffs and border barriers. What was once the relentless pursuit of cost efficiency and short routes has become a national security strategy in which governments and companies accept higher logistics costs as a form of strategic insurance, driving the creation of shorter, more resilient regional networks to reduce dependence on supply chains susceptible to geography and natural disasters. Companies no longer seek the cheapest supplier, but the safest one, accepting higher logistics costs that are more sustainable over time. Just as the pandemic forced companies to redesign their value chains, the closure of the Strait of Hormuz is forcing a reevaluation of logistics routes, suppliers, and the development of new forms of energy.
The magnitude of the impact is not limited to goods markets but extends to the financial system, driving up risk premiums, increasing the cost of capital, and putting pressure on banks and insurers exposed to energy- and transport-intensive sectors. Ultimately, future economic stability will depend on the creation of sustainable, perhaps shorter, supply chains which, in the short term, will have to acknowledge that energy trade flows can no longer depend exclusively on Gulf countries and, in the long term, consider strategies that are less dependent on fossil fuels. Despite the complex landscape, this crisis has the potential to act as a catalyst to overcome the inertia of the fossil fuel-based system. Governments and companies are seizing the opportunity and transforming these systemic shocks into long-term sustainability policies, viewing green innovation as a tool for energy sovereignty. However, even the transition to clean energy and shorter supply chains does not escape this logic, as it reduces but does not eliminate the potential effects of geographical constraints.
The 2026 crisis has not only disrupted trade routes and driven up energy costs; it is redefining the playing field of the global economy. Geography, far from having been surpassed by technology, is reasserting itself as the framework shaping economic, political, and business decisions. The lesson is not merely that supply chains must be more resilient, but that tomorrow’s world will inevitably be more fragmented, more strategic, and certainly less cost-efficient. In this new equilibrium, competitive advantage will not lie solely in lower-cost production, but in the ability to operate within an uncertain, physically constrained geopolitical landscape. This crisis makes one thing unmistakably clear: globalization has not eliminated geography; it has simply allowed us to forget, for a while, how important it is.
Patricia Gabaldón is associate professor of economic environment at IE University where she teaches applied economics and country economic analysis.