BNP Paribas Warns Global Economy Absorbs Early Shockwaves from Hormuz Strait Disruption

BNP Paribas said that the global economy has already begun absorbing the initial consequences of disruptions in the Strait of Hormuz, even as financial markets appear to have stabilized following weeks of heightened volatility.

In a recent report, the French banking group said the partial and temporary closure of the strategic maritime corridor has triggered visible negative effects on global demand through rising energy prices and slowing economic activity across several critical sectors.

According to the report, shortages in supply and surging petroleum product prices, particularly jet fuel and diesel, have started feeding directly into end-user demand. Several airlines have reportedly reduced summer flight schedules after jet fuel prices in Singapore more than doubled since the end of February.

The report also cited data from JPMorgan Chase showing declining petroleum product prices and refining margins in Europe despite continued tight supply fundamentals, which the bank interpreted as an early sign of “demand destruction” taking hold across the continent.

BNP Paribas said weakening demand for energy products is increasingly translating into slower economic growth, as households and businesses reduce spending and increase savings to absorb the impact of higher prices. The slowdown, the report noted, has become more pronounced in Europe than in other regions.

The bank added that growth expectations for the eurozone have already begun to deteriorate. Forecasts for 2026 economic growth were revised downward from 1.2% in March to 0.9% by the end of April, while global growth projections remain near 3% for this year. U.S. economic growth forecasts, meanwhile, continue to hold at around 2.2% for now.

The report stressed that the resilience of the global economy will depend largely on how long energy supply disruptions persist. Any delay in restoring full shipping operations through the Strait of Hormuz, it warned, could keep energy prices elevated for an extended period and intensify pressure on global growth.

Despite mounting risks, BNP Paribas noted that financial markets have adapted relatively quickly to developments surrounding the conflict. Market volatility doubled during the early weeks of the crisis before equity, bond, and currency fluctuations returned to near pre-conflict levels by late March, even as shipping disruptions in the Strait continued.

Still, the bank cautioned that the current calm in financial markets may not fully reflect underlying economic realities. It warned that disruptions to economic activity and rising inflationary pressures could worsen depending on the trajectory of negotiations between the United States and Iran.

The report further explained that central banks traditionally combat inflation by raising interest rates to suppress demand, but argued that the “demand destruction” caused by soaring energy prices may itself reduce the need for additional monetary tightening.

In line with long-standing commodity market theory, the bank concluded that elevated prices can eventually act as their own corrective mechanism by curbing consumption and encouraging increased supply over time.