Citi analysts suggest the global economy is more resilient to an oil shock, even if the Strait of Hormuz is disrupted. While a prolonged closure could raise oil prices and slow growth, a recession is less likely due to improved adaptability of businesses and households.

Oil tankers and cargo ships are seen in the Strait of Hormuz from Khor Fakkan, United Arab Emirates, on Wednesday, March 11, 2026.

According to Citi on Monday, the global economy is better prepared than in previous times to withstand an oil shock. This resilience holds true even if a prolonged interruption of supplies through the Strait of Hormuz causes prices to surge towards US$100 per barrel.

Increased Resilience and Adaptability

Citi asserts that increased resilience among households and businesses has raised the threshold for a global recession. A protracted closure of the Strait of Hormuz could result in a supply shortfall of several million barrels daily, even after drawing on reserves and increasing production elsewhere.

This disruption would present a significant challenge, especially for energy-importing Asian nations. However, Citi noted that the impact need not be decisive, given the economy's recent history of navigating the pandemic, the war in Ukraine, substantial interest rate hikes, and trade disruptions.

Citi highlighted that the global economy's adaptability, flexibility, and capacity to adjust to shocks are greater than in the past. The shock required to trigger a recession is now more substantial, attributed to the enhanced resilience of businesses and households.

Private Sector Leads Adaptation

Economic resilience would depend less on governmental policy, which is limited by high public debt and stagflation risks. Instead, it would rely more on the private sector's capacity to adapt.

This includes companies adjusting supply chains and managing costs, while households reduce spending, conserve energy, and switch to alternative resources. The brokerage also pointed out that the global economy has previously managed sustained periods of high oil prices without slipping into recession.

Potential Scenarios and Caveats

Citi's baseline forecast suggests the economy could absorb an oil shock nearing $100 per barrel, with growth slowing but remaining positive. In a more severe scenario, oil prices at approximately $110 for several months could push global growth below 2% and increase the risk of recession.

Citi cautioned that even with increased resilience, the global economy isn't completely protected from adverse outcomes. The magnitude of the shock needed to cause significant economic damage is larger than it was a decade or two ago, but a substantial challenge still exists.

Strait of Hormuz: A Critical Chokepoint

The situation in the Strait of Hormuz, a critical chokepoint for global oil transit, remains a key factor. Any disruption there carries significant implications, ranging from escalating energy costs and inflation pressures to impacting global trade flows.

The concentration of oil tankers and cargo ships in the area underscores the importance of the situation. The world is watching these developments closely. The ability of the global economy to manage such a disruption will depend on its underlying strength and the adaptability of businesses and consumers.

The capacity of nations to tap strategic reserves and boost production elsewhere will also be critical. Furthermore, the role of international cooperation in managing any crisis will be vital in protecting the global economy. All these factors would together shape the eventual economic fallout.