Hormuz blockade squeezes German steel

German steel output fell 2.8% year-on-year (Tradingeconomics). The M+E sector — mechanical and electrical engineering, the machinery spine of German manufacturing — shrank 1.3% (Gesamtmetall). Logistics insolvencies reached 11.1 per 10,000 firms, the sector’s highest rate.

One hundred days into the Strait of Hormuz blockade, the shock is already inside Europe’s industrial system. For Malta, it will arrive less through factory closures than through dearer imports, tighter delivery times and another round of pressure on businesses already pricing around energy and freight.

From strait to factory floor

The Strait of Hormuz, the narrow waterway between Iran and Oman, normally carries about 14.8 million barrels of oil a day, roughly 14% of global demand. Traffic is now running more than 90% below normal.

The world’s largest emergency stockpile release, 400 million barrels activated on 11 March, is being used up quickly. OECD emergency reserves have fallen to a 60-90 day buffer, close to the statutory safety floor set by the IEA, the International Energy Agency.

Brent crude, the global oil benchmark, has settled around $93-98 per barrel. That is roughly 35% above pre-crisis levels, though still far below the $200 some analysts feared.

The price has been held down by two forces. Saudi and UAE bypass pipelines can move 3.7-5.7 million barrels a day outside Hormuz. China’s crude imports fell to their lowest level since 2020, while global oil demand was 2.3 million barrels a day lower year-on-year in April. Demand weakened fast enough to absorb part of the supply loss.

How deep the cracks run

The ifo Institute’s May survey found 15.9% of German manufacturers reporting material shortages, up from 13.8% in April. Chemicals were hit hardest, at 31.2%.

The squeeze goes beyond basic raw materials. Swiss lubricant manufacturer Motorex says input costs are up 200-300%, with only three to five months of stock left.

Germany’s full-year GDP growth forecasts have been cut to 0.3-0.5% for 2026. The eurozone as a whole shrank 0.2% in Q1.

The bill arrives in winter

The sharpest consumer effect is still ahead. The IMF estimates that a doubling of freight rates adds 0.7 percentage points to inflation, with the peak arriving about 12 months later.

Rabobank expects Dutch food prices to be 7% higher by Christmas, as fertiliser and transport costs move through supply chains. Container rates on Asia-Europe routes rose 20-25% in the first week of June alone.

The ECB, the European Central Bank that sets interest rates for the eurozone’s 20 countries, faces a choice with no clean answer. Eurozone inflation reached 3.2% in May, pushed by 9.9% energy price growth. Markets put a 99% probability on a rate hike to 2.25% on 11 June.

The difficulty is that the economy is already contracting. Raising rates can cool demand, but this inflation is being driven by an oil supply shock: prices rise because goods and energy cannot move normally, not because consumers are spending too freely. That is the stagflation trap, with weaker growth and higher prices arriving together.

Even if Hormuz reopens tomorrow, Rabobank estimates that normalisation would take until September. Mine clearance, tanker repositioning and depleted inventories cannot be fixed overnight.

The damage already moving through supply chains will reach grocery shelves and energy bills later. Wednesday’s ECB decision will show whether the central bank gives priority to the inflation it can measure now or the recession it can already see forming.