Hormuz crisis raises wider risks for Turkey far beyond oil prices, says policy brief

The Strait of Hormuz crisis brought about by the Iran war does not merely present Turkey with an energy price issue – it creates a multi-layered risk environment that could also simultaneously exert pressure on industrial production, agriculture and logistics, according to a policy brief published by the Economic Policy Research Foundation of Turkey (Tepav).

The analysis, titled, “The Strait of Hormuz Crisis: Global Supply Chain Risks and Economic Implications for Turkey,” points to a wide range of potential impacts across industrial inputs and fertiliser sourcing to logistics and energy bills.

Turkey imports between $700mn to $1bn worth of aluminium and aluminium products annually from Gulf producers, particularly Bahrain, Qatar, the United Arab Emirates and Oman, according to the paper.

Imports of plastics and petrochemical raw materials from these countries, meanwhile, reach approximately $2bn per year.

“A significant portion of these products is shipped from Persian Gulf ports and transported to Turkey via the Strait of Hormuz. Any disruption in the strait could therefore create a serious logistical vulnerability for key industrial inputs,” the assessment said.

“Another critical input that could be affected by the crisis is monoethylene glycol [MEG]. As the main feedstock for polyester fibre and PET [polyethylene terephthalate] production, MEG plays a vital role in Turkey’s textile, apparel and packaging industries,” it added.

Turkey’s annual MEG imports amount to roughly $700-900mn, with around 35-40% of the supply shipped by Gulf producers, according to the report.

“A logistical disruption in Hormuz could increase the cost of this input and create cost pressures in polyester production. This may, in turn, pose a competitiveness risk for Turkey’s textile and apparel exports exceeding $30 billion,” it warned.

The policy brief also observed that another possible impact of the Hormuz crisis on Turkey may emerge in agriculture.

Turkey’s annual chemical fertiliser consumption stands at approximately 6-7mn tonnes, and a significant portion of this demand is met through imports, with Gulf nations accounting for 15-25% of the country’s nitrogen-based fertiliser imports.

“Rising fertilizer costs driven by higher energy prices may increase production costs for strategic crops such as wheat, corn and sunflower. Experts suggest that these cost increases could eventually be reflected in food prices,” the report concluded.

The high volatility now present in freight markets is also raising Turkey’s foreign trade costs. Rising shipping rates and longer transit times could complicate delivery planning in sectors including textiles, automotive supply, machinery making and white goods manufacturing, according to the report.

The report acknowledged, however, how the most significant macroeconomic impact of the crisis on Turkey — the annual energy import bill of which is approximately $60–65bn — is likely to emerge through energy prices.

“It is estimated that every $10 increase in oil prices could add roughly 4.5-5 billion dollars to the current account deficit. If oil prices stabilise in the $90-100 per barrel range, this could create additional pressure on both budget balances and inflation,” the report said.