The ongoing geopolitical crisis in the Persian Gulf, which has been unfolding since late February, has triggered serious shocks to the global economy. Among the most significant problems, including for post-Soviet states, is the factor of imported inflation, which leads to higher prices for goods brought in from abroad. Nevertheless, as a beneficiary of rising oil and gas prices and a country with its own fertiliser production, Azerbaijan is spared from a number of risks associated with the intensifying global economic crisis.
The blockade of the Strait of Hormuz, which has lasted for two and a half months and disrupted supply chains, has significantly increased transport, logistics, and insurance costs, all of which have noticeably pushed up energy prices. Despite the cessation of hostilities and the start of negotiations between Washington and Tehran, for the third consecutive month, tankers and other vessels under various flags have been avoiding transshipment of oil and other cargoes due to the risk of attacks by Iran or its proxies. Meanwhile, international insurance companies have withdrawn war-risk coverage for civilian shipping operating in the region.
The negotiation process is essentially at an impasse, as the parties are putting forward mutually unacceptable demands. In Iran’s proposals, emphasis is placed on compensation payments for damage caused by the war, and Iran’s sovereignty over the Strait of Hormuz is underscored. Iran also calls on the United States to lift the maritime blockade, guarantee the absence of further attacks, remove sanctions, and repeal the ban on the sale of Iranian oil.
According to the French news agency AFP (Agence France-Presse), on May 11 US President Donald Trump announced his rejection of Tehran’s response to Washington’s peace proposal. “I don’t like it – TOTALLY UNACCEPTABLE!” Trump wrote on the Truth Social platform. Reuters commented that Trump’s rejection of Iran’s response has dashed hopes for a near-term end to the conflict in the Middle East. Among other things, the reaction to these remarks triggered another spike in global oil prices: on the morning of May 11, the price of Brent crude oil futures for July delivery on the London ICE exchange rose by 4.64%, approaching $106 per barrel.
Even without considering the prospect of renewed hostilities in the Persian Gulf region, it is quite evident that the current situation with the continued blockade of the Strait is acting as a catalyst for rising energy prices and, accordingly, serves as a key factor driving the global economic crisis.
Even before the outbreak of the “big war” in the Middle East, analytical centres around the world had noted the presence of serious contradictions that were fracturing the cohesion of the global economy in 2025–2026. In this context, the most visible manifestation of geo-economic confrontation has been the tariff standoff, which has slowed the dynamics of global trade and investment, weakening supply chains and logistics.
Unfortunately, the current situation is far more complex: the blockade of the Strait of Hormuz, as well as strikes on port terminals and oil and gas facilities in Persian Gulf countries, have caused damage estimated at around $58 billion. Conditions are only slightly better in Egypt, which is not directly involved in the war, where rising prices are being recorded and the threat of a food crisis has emerged. These same factors are also intensifying the risk of famine and acute fuel shortages in the poorest countries of Africa and Asia. Thus, on the eve of this development, Indian Prime Minister Narendra Modi called on citizens to use petrol and diesel more rationally and to conserve other energy resources amid the approaching economic crisis.
Another factor increasing pressure on countries around the world is the shortage of nitrogen fertilisers, which is having a highly negative impact on agricultural productivity. Notably, around one-third of global exports of urea and the raw materials for its production are supplied by the gas-rich states of Qatar, Saudi Arabia, and Iran. Moreover, amid the conflict, global prices for urea and nitrates in April–May 2026 have nearly doubled compared to the beginning of the year.
The most vulnerable again remain low-income countries, where, according to estimates by the International Monetary Fund (IMF), food expenditure accounts for an average of around 36% of consumption, compared to 9% in developed countries.
The prolongation of the confrontation in the Gulf has also led to shortages of several other materials. In particular, helium exports from the Persian Gulf states—used in semiconductor manufacturing and medical equipment—have been almost completely halted. There is also a noticeable shortage of sulfur (a by-product of oil production), which is used in the production of sulfuric acid required for nickel extraction from ore.
However, the situation on the gas front is not much better either, due to the suspension of liquefied natural gas supplies from Qatar, whose facilities and infrastructure were damaged as a result of Iranian drone and missile strikes. This crisis is being felt most acutely in the European Union, where, following the winter heating season, gas reserves have fallen to extremely low levels, and the replenishment of underground gas storage facilities (UGS) has become highly problematic.
According to data from Gas Infrastructure Europe, by the end of April 2026, gas prices had increased by one and a half times compared to pre-war levels in the Middle East. As a consequence, production costs are rising for refineries, petrochemical and metallurgical complexes, as well as other processing and energy-intensive industries in many countries outside the conflict zone.
It is therefore not surprising that, against the backdrop of increasingly pessimistic developments, the IMF revised its forecasts in April of this year, lowering global economic growth projections for 2026 by 0.3 percentage points compared to last year’s figure of 3.4%.
Corresponding forecasts by the World Bank and the European Bank for Reconstruction and Development also point to a contraction in production and foreign trade, with global GDP expected to decline to 2.6% and 2.3% respectively.
The impact of this global negative trend is also being felt to a certain extent in our country, and the key risk is associated with the transmission effect of import prices on domestic inflation, with this factor primarily depending on price dynamics in our country’s main trading partners. At the same time, experts from international donor institutions and rating agencies believe that, as a beneficiary of rising oil and gas prices, Azerbaijan may improve its economic growth performance in 2026. In particular, experts from Fitch Ratings, Moody’s, and the Dutch banking group ING Group expect domestic GDP growth to reach 2.5%.
It is therefore not surprising that, amid increasingly pessimistic global economic developments, the IMF revised its outlook in April this year, lowering its global growth forecast for 2026 by 0.3 percentage points, compared to the previous estimate of 3.4%.
Similar projections from the World Bank and the European Bank for Reconstruction and Development also indicate a slowdown in output and international trade, with global GDP growth expected to ease to 2.6% and 2.3% respectively.
The impact of these global trends is also being felt to a certain extent in Azerbaijan. The main risk is linked to the transmission of import price fluctuations into domestic inflation, a factor largely dependent on price dynamics in key trading partner economies.
At the same time, experts from international financial institutions and rating agencies note that, as a beneficiary of rising oil and gas prices, Azerbaijan could see improved economic performance in 2026. In particular, analysts from Fitch Ratings, Moody’s, and ING Group expect domestic GDP growth to reach around 2.5%.
Amid rising energy prices, the profitability of domestic oil exports increased noticeably in March–April of this year, despite the ongoing decline in production at depleted fields observed in recent years. According to BP data, in the first quarter of 2026, an average of around 74.4 million standard cubic metres of gas per day from the “Shah Deniz” field were exported via the Sangachal terminal, with gas exports increasing by 1.5% year-on-year.
Given the rise in oil and gas prices, the country is receiving additional revenues: the state budget of Azerbaijan for 2026 is based on an average oil price of $65 per barrel, and “excess” revenues are being sterilised and transferred to the State Oil Fund of the Republic of Azerbaijan (SOFAZ). Moreover, Azerbaijan fully meets its domestic demand for oil, oil products, and natural gas independently, and thanks to this energy self-sufficiency is largely insulated from the impact of high global energy prices.
For comparison, in March 2026 alone, fuel prices in the EU rose by 12.9% year-on-year, with diesel increasing by 19.8% and petrol (AI-95) by 9.4% compared to the same period last year. In the United States, by late April–early May, petrol prices reached a four-year high, exceeding $4.46 per gallon (1 gallon = 3.785 litres).
In Azerbaijan, during the same reporting period, fuel prices and natural gas tariffs remained unchanged. Amid the global rise in fertiliser prices, Azerbaijan is also benefiting: last year alone, export revenues of the SOCAR Carbamide plant in Sumgayit increased by nearly 45%, with even higher profitability potentially expected by the end of the current year.
At the same time, SOCAR Carbamide fully meets domestic agricultural demand for fertilisers, and its urea selling prices are significantly lower than global market levels.
Notably, in contrast to the global crisis, Azerbaijan’s key macroeconomic indicators have improved significantly: according to statistics from the State Customs Committee of the Republic of Azerbaijan, in the first quarter of 2026, the positive foreign trade balance amounted to $1.4 billion, which is 93.3% higher than the figure for January–March of the previous year.
The Central Bank of Azerbaijan has also recently raised its forecast for the country’s current account surplus. In 2026, this indicator is expected to reach $5.5 billion, compared to $3.5 billion recorded last year.
Another positive aspect of the current situation is the steady growth of Azerbaijan’s strategic foreign exchange reserves. In January–April, they increased by $2.9 billion, rising by 3.4% overall and reaching a total of $88 billion.
Overall, as the situation demonstrates, the government is successfully ensuring stability, security, and prosperity in Azerbaijan.