Economic Fallout From Strait of Hormuz Closure to Dominate G7 Meetings

The economic consequences of the continued closure of the Strait of Hormuz are expected to take center stage as finance ministers from the Group of Seven gather in Paris on Monday amid mounting concerns over inflation, energy shortages, and global market instability.

Ahead of the meeting, Kyriakos Pierrakakis, president of the Eurogroup, warned that the crisis in the Middle East has exposed the fragility of the interconnected global economy to external shocks.

“Reopening the Strait of Hormuz and bringing the conflict to a definitive end are critically important to mitigating the economic impact,” Pierrakakis said in remarks cited by CNBC.

The Eurogroup, which represents eurozone finance ministers, will participate in the G7 discussions through Pierrakakis, who also serves as Greece’s finance minister. The G7 includes the United States, United Kingdom, Canada, France, Germany, Italy, and Japan.

Pierrakakis said Europe’s economy had demonstrated resilience during the latest energy shock, but cautioned that the broader global economy would remain under pressure even if the conflict is resolved quickly.

Bond markets across major advanced economies have already shown signs of stress in recent weeks as investors react to rising inflation risks linked to constrained oil and gas supplies passing through the strategically vital Strait of Hormuz.

In the United States, Treasury yields surged Friday following mixed inflation data and growing market attention toward future interest-rate policy under new Federal Reserve Chair Kevin Warsh.

The yield on 30-year U.S. Treasury bonds climbed around 11 basis points to 5.121%, its highest level since May 2025 and close to peaks last seen in October 2023.

Meanwhile, long-term government borrowing costs in the United Kingdom have risen to their highest levels since the late 1990s, driven by a combination of political uncertainty and inflation concerns.

Japan, heavily dependent on imported energy, has also experienced a sharp rise in bond yields amid fears of prolonged energy-driven inflation stemming from the Iran conflict.

Oil prices remain elevated as markets continue pricing in supply disruptions. Global benchmark Brent Crude futures for July delivery rose more than 3% on Friday to settle at $109.26 per barrel, while U.S. West Texas Intermediate crude climbed over 4% to close at $105.42 per barrel.

Brent prices are now up roughly 74% since the beginning of the year, though still below the late-April peak of $118 per barrel.

Global oil inventories are falling at a record pace as countries draw down reserves to offset severe supply disruptions from the Middle East. Analysts warn that stockpiles could approach critical levels if shipping through the Strait of Hormuz is not fully restored soon.

Last week, the International Energy Agency warned in its monthly market report that oil and fuel prices could surge further ahead of the peak summer demand season.

“The rapid drawdown in inventories amid ongoing disruptions could signal sharper price spikes ahead,” the agency said.