UN warns Hormuz disruptions threaten small firms' global trade

UN Trade and Development warned on Tuesday that ongoing disruptions in the Strait of Hormuz risk permanently locking small and medium-sized enterprises out of global value chains, as soaring energy, transport and financing costs squeeze smaller firms that lack the risk-spreading capabilities of large multinationals. Large companies can distribute risks across multiple suppliers, markets and financing sources, while SMEs typically operate with narrower margins and fewer alternatives, leaving them exposed to volatility in the strategic waterway that handles a significant portion of global oil shipments.

The disparity is particularly acute in developing economies, where compliance with import requirements costs small firms an average of 19.4% of the value of directly imported products compared with just 8.3% in developed nations, according to the report. Medium-sized firms in developing markets face costs of 17.5% versus 7.8% in advanced economies, while large firms incur 14.7% compared with 7.6%, highlighting how regulatory burdens fall heaviest on those least equipped to absorb them.

Financing barriers

Access to trade finance presents additional hurdles, with 48% of small firms in developing economies identifying financing constraints as a major obstacle to operations, compared with 42% of medium-sized and 38% of large firms in those markets. The gap persists in developed economies, where 28% of small firms report finance as a barrier versus 23% of medium and 20% of large enterprises, based on UNCTAD data covering more than 90,000 firms across 114 developing and 43 developed economies.

When SMEs are forced out of value chains, unemployment can rise, household incomes decline and social vulnerability increase across affected regions. "Trade resilience requires SMEs to remain part of value chains," the report said. "Otherwise, recovery may simply mask greater concentration among larger firms."

Call for support measures

The agency called for urgent measures to strengthen access to trade finance, liquidity and working capital for smaller enterprises, alongside affordable logistics and targeted assistance to help SMEs maintain and diversify supplier and customer relationships. "As engines of job-creation, micro, small and medium-sized enterprises are critical to every country's future," UN Secretary General Antonio Guterres said in the report.

The warning comes as disruptions in the Strait of Hormuz continue into their third month following the outbreak of war between the US, Israel and Iran on Feb. 28. The blockade has forced vessels to navigate alternative routes, driving up insurance premiums and freight rates that disproportionately burden smaller trading operations with limited capital reserves.