“Global choke points”: Maritime bottlenecks as a risk for the global economy and geopolitics

More than 80 percent of global trade in goods is transported by ship across the world's oceans, with China and the Gulf region as important hubs. The problem is that each of the highly frequented routes has topographical bottlenecks - natural straits such as the Strait of Hormuz, which has come back into focus due to current developments in Iran, or the Strait of Malacca, but also man-made passages such as the Panama or Suez Canals. In the newly published analysis "Global Choke Points: Maritime choke points as an underestimated risk factor for the global economy and geopolitics", the FERI Cognitive Finance Institute examines the significance of these choke points and the risks associated with them, which companies and investors should also be aware of.

Threat of crisis-like distortions for global trade and the global economy

"Maritime bottlenecks play a crucial role in determining the cohesion of global transaction networks and supply chains and, as critical bottlenecks, are indispensable for the smooth functioning of the global economy. At the same time, they are also central elements of geostrategic security interests - often of existential importance," says Dr. Heinz-Werner Rapp, founder and head of the FERI Cognitive Finance Institute. However, the security and integrity of these global bottlenecks can by no means be taken for granted - quite the opposite, as Rapp emphasizes: "Important maritime bottlenecks are characterized by increasing risks and acute conflicts. The bottlenecks of global trade are thus becoming potential fault lines for the global economy and geopolitics - and therefore explicitly dangerous ‘global choke points’."

Large quantities of raw materials, energy sources and consumer goods travel the world's oceans every day. "Depending on the origin of the goods and their intended destination, the shipments have to pass through various maritime bottlenecks. These are of enormous importance for the smooth organization of global trade flows - and therefore also for the smoothest possible flow of world trade," says Rapp. Deliberate or accidental disruptions to one or more of these choke points could therefore trigger serious - possibly even extremely critical - disruptions to global trade and the global economy. The sharp rise in oil prices following the escalation of the Israel-Iran conflict last Friday showed just how real these dangers are for the global economy: As a country bordering the Strait of Hormuz, through which around a fifth of global oil trade is transported, Iran has great potential to significantly disrupt the global oil market.

Global choke points are moving into the focus of power politics

“The ‘global choke points’ represent a serious potential threat that is becoming increasingly relevant for the geostrategic planning games of major powers such as China and the USA,” says Rapp. The growing importance is already evident in the fact that the new US President Donald Trump made US claims to take over the Panama Canal even before his inauguration. In a mirror image of this, China is striving for as complete control as possible of the Taiwan Strait - a highly explosive goal with enormous potential for conflict. "Against the backdrop of heightened global tensions, the ‘global choke points’ are increasingly becoming the focus of geostrategic players in terms of power politics. This is particularly true for China and the USA," says Rapp. In view of the growing risks, entrepreneurs and investors should therefore also keep a very close eye on further developments around the global choke points.

The new Cognitive Briefing "Global Choke Points: Maritime choke points as an underestimated risk factor for the global economy and geopolitics" from the FERI Group's Bad Homburg think tank provides investors and entrepreneurs with in-depth insights into the underlying issues and supports them in analyzing and assessing future challenges. The analysis is available in German for download on this page.