KITE Model: How a Strait of Hormuz Closure Would Affect Austria

In the short term, Austria's real purchasing power would decline by 0.15 percent, real wages would fall by 0.15 percent, production would decrease by 0.14 percent, and consumer prices would rise by 0.15 percent compared with the main scenario. "Even if Austria is not directly affected by the lack of energy supplies from this region, the domestic economy is not insulated from an energy price shock", says Pokhrel.

The strongest immediate effects for Austria are emerging via the energy markets. In the short term, prices in Austria would rise by around 12.1 percent for crude oil, 8.3 percent for petroleum products, and 7.9 percent for natural gas. These increases would also feed through to other sectors, including chemicals, electricity, plastics, and food. The findings show how disruption in a key global energy corridor can propagate through production chains and raise macroeconomic costs.

The effects could ease in the longer term as firms and markets adjust. In the long run, Austria's real purchasing power loss would narrow to 0.05 percent, and production would almost return to baseline. "The results suggest that the greatest strain would occur immediately after the shock, when switching suppliers and reorganising logistics is hardest", says Pokhrel. "This underlines the importance of short-term resilience measures such as diversification, stockpiling, and targeted support for exposed sectors."

For the EU, the analysis shows that vulnerability stems less from direct dependence on energy imports from the Gulf region than from the continued importance of fossil fuels in integrated production networks. Austria is therefore affected largely indirectly, through higher world market prices for fossil fuels and input costs, as well as potential supply bottlenecks.

The Research Brief is based on a WIFO simulation of various scenarios using the KITE trade model. It compares a scenario involving an immediate disruption, where opportunities for adaptation are limited, with a longer-term scenario where firms and consumers can adapt more comprehensively and substitute fossil fuel supplies. The reported effects are not forecasts but estimated deviations from a baseline path. These capture the trade and production effects of a disruption to supplies via the Strait of Hormuz, but do not include additional impacts, such as destruction caused by military conflict in the region or panic on financial markets.