Courtesy The Daily Mirror

Colombo, March 28 (Daily Mirror) –  A new report by the Kiel Institute for the World Economy has sounded a sharp alarm for Sri Lanka, ranking it as one of the most vulnerable nations globally to a shutdown of the Strait of Hormuz. 

Following the recent military escalations in the Persian Gulf and the subsequent de facto closure of the waterway on February 28, 2026, researchers warn that the island nation faces a “seismic shock” that could derail its delicate post-2022 economic recovery. The study highlights that while the world often focuses on oil, for Sri Lanka, the crisis will rapidly evolve into a dire food security emergency.

The vulnerability stems from a “triple threat”: a near-total dependence on imported energy, a reliance on imported fertilizers, and a large agricultural sector with few domestic alternatives. According to the report, titled The Cost of Closing the Strait of Hormuz,” Sri Lanka faces the second-steepest projected rise in food prices globally, with costs expected to soar by over 15%. This is driven by the fact that the Strait handles roughly one-third of the world’s nitrogen-based fertilizers; a disruption during the current March planting season could lead to failed crops or drastically reduced yields for the entire year.

The economic impact is already manifesting in the streets of Colombo. 

Retail fuel prices have climbed by 8% in just three weeks, prompting the government to reintroduce the QR-code fuel rationing system and declare weekly holidays for public institutions to conserve energy. Beyond the pump, the “tea-for-oil” barter arrangement with Iran has frozen, leaving the tea industry—a primary source of foreign exchange—in a state of paralysis. Experts at the Institute of Policy Studies (IPS) estimate that a prolonged closure could add an staggering $1.9 billion to the national import bill, a 23% increase that the country’s thin foreign reserves are ill-equipped to handle.

President Anura Kumara Dissanayake recently addressed the nation, stating that the government “must prepare for the worst while hoping for the best.” While India has stepped in with emergency fuel shipments via the Indian Oil Corporation, analysts warn that these are only short-term cushions. 

The Kiel Institute study notes a growing divide in global resilience, pointing out that while wealthier nations like the U.S. may see negligible losses, South Asian nations like Sri Lanka suffer “welfare losses” ten to twenty times larger, making the Hormuz closure not just an energy crisis, but a fight for survival.