Sri Lanka may face a new economic crisis after Iran closed the Strait of Hormuz, a key global shipping route, a report by the Kiel Institute for the World Economy warns.
The closure could raise food prices by about 15%, disrupt fuel and fertilizer supplies, and threaten the country’s economic recovery. Sri Lanka’s heavy reliance on imports makes it highly vulnerable.
Fuel prices have already increased, and rationing may return. Fertilizer shortages could reduce crop yields, while exports like tea are also affected due to shipping issues and weaker demand.
The Strait of Hormuz is known as the bottleneck of world shipping. The report says foreign reserves could drop by around 23%, and even support from India may not be enough, as the crisis impacts multiple sectors beyond fuel.