With every day of disruption in the Strait of Hormuz, the economic damage is increasing. Iran’s desire to weaponize the waterway is an attempt to hold the global economy hostage. It once again exposes the strategic vulnerabilities at the heart of global trade and reminds us that – in this new era of geo-economics – we urgently need to strengthen our economic security.
By impacting fuel, food and fertiliser, the Hormuz crisis is hurting families and businesses around the world. While oil prices fluctuate day to day, the impact on agriculture will extend over weeks and months, impacting the planting season and future crop yields. The World Food Program has warned that 45 million people in the poorest countries could be pushed into severe hunger if the conflict is not resolved by mid-year.
As Britain’s Foreign Secretary, I have worked this month to build international pressure to fully and rapidly reopen the strait – restoring freedom of navigation, without any restrictions, conditions or tolls. Iran’s plan to levy tolls would fundamentally undermine the law of the sea and set a harmful precedent for maritime trade around the world.
The Hormuz crisis is not an external phenomenon. It is the third time in six years that international events have sent economic shockwaves around the world. The Covid-19 pandemic, Russia’s invasion of Ukraine and now the Iran conflict. Volatility and volatility are the new normal and countries around the world are increasingly turning to economic tools to exert global leverage, whether it be coercion or coercion.
Supply chains that were once purely commercial are now seen as strategic vulnerabilities. As competition for control of critical minerals needed for future vehicles, defense systems and the energy transition is intensifying, China is determined to maintain and exploit its current production advantage and face challenges from export restrictions and controls. Furthermore, tariffs are rising, with US tariffs at levels not seen since the 1930s.
These are generation-defining changes. Over the past few decades the democratic world operated on the assumption that economic globalization and free trade would increase opportunities, reduce barriers, and spread prosperity more widely. A common framework of rules and standards will provide economies with the stability they need to grow.
These notions were always inadequate. Many people did not experience the benefits of globalization and concluded that the promises made in its name were not kept. But now those assumptions are being overturned as part of a broader and more fundamental challenge to open economies and rules-based orders.
In the face of this turmoil, we cannot simply abandon the rules and accept a world in which might is right and coercion becomes normal. But nor should we attempt to reorganize the old system. Instead, we must work to ensure that we remain economically open, allowing everyone to benefit without being economically exposed. Many implications emerge from this.
First, prosperity and security can no longer be considered separately. Because when countries become overly dependent on single suppliers, fragile transit routes or concentrated technologies, it goes beyond an economic weakness to a strategic weakness. Resilient supply chains are not a technical concern but essential for national strength and the core of foreign policy. That is why I have asked the Foreign Office to prioritize not only economic growth but also economic resilience in our dealings around the world.
Second, amid superpower competition, countries like Britain need to efficiently establish their position among the world’s major factions. For us, this includes strengthening cooperation with our nearest neighbours. Having already reset our relationship with the EU, we are now targeting further cooperation – including on security and defence, and alignment to reduce food and energy costs. From trade to intelligence to NATO, our partnership with the United States remains indispensable and our engagement with China brings economic benefits. But in every decision we will assess what is in our national interest, to protect ourselves and to protect our agency.
Third, trading countries outside those largest blocs need to work together in new and proactive ways. Britain is not a stand-alone superpower, but we have real economic weight, technological strength and global reach, strengthened by membership of major economic blocs such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a high-standards free-trade grouping, whose membership we are working to expand.
Britain is in good company with other powers that are reassessing their own economic resilience: countries that are also prepared to stand up for a rules-based order that reflects their interests and values. Take the example of recent international support for freedom of navigation and upholding the laws of the sea. And I see great potential for further enhancing our collective value between like-minded partners. This was the focus of my recent visit to Japan, where I met ministers working on economic security, and it is why I have invited the foreign ministers of countries including Australia, Canada and the Republic of Korea to discuss the most pressing geo-economic challenges. This involves working together to safeguard an open international economy and adapt it to a more competitive era.
Fourth, we must seize this moment for the clean-energy transition. For a century, global energy has been based on concentrated resources, production cartels and geographical choke-points. The Hormuz crisis highlights how unstable this is. We have an historic opportunity to reduce our dependence on unsustainable fossil fuels and lead and drive that change globally. Every wind turbine, solar panel and nuclear power station strengthens our energy resilience and protects families and businesses from future shocks.
Finally, frontier technology is at the heart of future economic power – the US and China are already leading the way. AI will determine not only the direction of jobs, investment and growth, but also the resiliency of our societies and critical national infrastructure. The British Government is therefore going to great lengths to strengthen the national capabilities on which our sovereignty and prosperity depend. For example, this month, we launched the next phase of the UK Sovereign AI Unit, backed by a £500m ($675m) commitment to build core national AI capabilities. But economic diplomacy is important here, too: we must continue to work to shape the global norms and rules needed for effective governance of these powerful and unprecedented new forces.
In a world of profound change, economic choices now shape security and sovereignty just as much as they shape prosperity. For countries like Britain, the answer is not to retreat from openness, but to be more rigorous about what openness means, and about the diplomatic changes needed to ensure that our partnerships abroad make us safer and more prosperous at home.
Yvette Cooper is the Foreign Secretary of Britain.