So far the losses sustained by marine-war insurers are nowhere near as steep as in the political-violence market. Stale Hansen, boss of Skuld, one such insurer, says that even the total loss of a ship would not be a “game changer” for the market. Oil tankers are not hugely expensive, often fetching between $80m and $120m apiece. For comparison, marine insurers collect premiums totalling around $40bn per year. And few skippers, after all, have yet risked destruction by attempting to cross the strait. As a result, marine insurers may do well from the war. But the longer it lasts, the more uncertain their prospects become. Many policies have provisions for “blocking and trapping”. These trigger payouts after a vessel has been stranded for a set period—usually six or 12 months—after which it is deemed lost. Should Hormuz stay shut for long enough, such provisions might apply to 2,000 or so ships stuck behind it. After Russia invaded Ukraine, blocking-and-trapping clauses eventually led to hundreds of millions of dollars in insurance losses. And far more boats are now in the Gulf than ever were in the Black Sea, threatening much bigger payouts. Insurers are therefore eager for a programme to help vessels safely escape. Some of those stranded in the Black Sea by war in Ukraine were eventually able to leave under a UN-brokered scheme. Government support for a similar scheme in Hormuz would help. However, the most recent attempt by President Donald Trump—his short-lived Project Freedom—provoked Iran to launch more missiles and was then promptly called off. Progress in peace talks, meanwhile, seems about as dependable as a fair wind. It may be a long time before skippers and their insurers have room to relax. ■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/05/21/the-insurers-on-the- hook-for-war-in-iran

Finance & economics | Flying pterodactyl The other China shock Does the country’s manufacturing success leave space for anyone else? May 21st 2026 “Wild geese fly in orderly ranks,” noted Akamatsu Kaname, a Japanese economist, when contemplating the progress of Japan’s textile industry in the 1920s and 1930s. The birds’ V-shaped formation has served as a popular analogy for how manufacturing spread in East Asia. As Japan prospered and its wages rose, labour-intensive industries migrated from the leader of the flock to followers like South Korea and Taiwan. Many expected China to provide such an updraft to poorer countries. Now they have doubts. Despite China’s rising wages and sophistication, it “still commands a historically unusual share” of low-end manufacturing, according to a new paper by Shoumitro Chatterjee of Johns Hopkins University and Arvind Subramanian of the Peterson Institute for

International Economics. Even as the likes of Germany fret about China’s entry into high-spec industries, poorer places wonder when it will vacate lower-end niches they want to fill. Manufactured goods are sometimes divided into four types: low-, medium- and high-tech, plus those based on natural resources, such as refined petroleum. Between 2010 and 2024, China’s share of global exports rose in all four categories, according to a paper by Yu Fei and Guo Kai of the CF40 Institute, a Chinese think-tank. Its “manufacturing appears to be competing with all countries”, they wrote. In some cases, China’s share is even bigger than it appears from raw export figures. The country makes valuable parts for labour-intensive goods that may be stitched or bashed into final form elsewhere. China provides 64% of the value embodied in all the garments, textiles, leather and similar goods exported from 30 low- and middle-income countries for which suitable data are available. This percentage is far higher than China’s share of the working-age population for this income group (see chart 1).

What explains China’s failure to fly in an orderly rank? One factor is its sheer size. China added “a demographic pterodactyl to the flying geese”, noted Lant Pritchett, a development economist, in 2010. Another factor is the staggered nature of its development. Some parts of the country have become well-to-do, even as others remain relatively poor. Ms Yu and Mr Guo point out that China’s four richest cities (with a combined population of 84m) have a GDP per person that exceeds Japan’s. Its poorest four provinces (population 140m), meanwhile, are closer in income to Vietnam (see chart 2). China, they say, is equivalent to 0.7 Japans, nearly six Malaysias, five Mexicos, four Thailands and 1.4 Vietnams. No wonder it competes with all of them. But there is more to it than that. Workers in those five countries cannot easily move between them. Chinese ones, on the other hand, are relatively free to migrate from its Vietnam-equivalents to its Malaysias and Japans. Their ability to depart for higher-wage provinces should raise pay in low-end industries, rendering them uncompetitive. China’s policymakers once seemed resigned to this evolution. Now they seem determined to resist it. “We must continue to transform and upgrade traditional industries,” said President Xi Jinping in 2023, “and avoid simply treating them as ‘low-end industries’ to be abandoned”. One way to offset wage costs is automation, robotics and other technological innovations—so China increasingly strives

to make low-end goods with high-tech methods. Wild geese fly in orderly ranks. But not if drones get in the way. ■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/05/21/the-other-china-shock

Finance & economics | Locked out Economics lessons from Home Depot What the world’s biggest DIY store says about American housing May 21st 2026 Home Depot is no ordinary retailer, but a barometer for America’s housing market. Comparable sales at the world’s biggest DIY chain fell sharply in 2007, before many on Wall Street cottoned on to the coming housing crash. More recently its revenues surged along with the boom that followed the covid-19 pandemic. Since then Home Depot has again felt the strain. Though home prices have held up, the home-buying frenzy subsequently ground to a halt. Annual transactions fell by 20% in 2022 and by 30% in 2023. Mortgage rates have fallen from their peak in 2023, but sales of existing homes over the past two years have been the lowest in three decades, according to the National Association of Realtors. Speaking in April, Richard McPhail, Home Depot’s

finance chief, put it plainly: “We have never seen housing activity this slow for this long.” All this means fewer DIY projects. Favourable currency exchange rates boosted revenue growth in Home Depot’s latest fiscal quarter, for which it released results on May 19th. But strip these out and annual sales in America have been falling or flat for three years. Customer transactions last year were 9% below a peak in 2021. Worse, there is little sign of improvement. Home Depot expects comparable sales to be unchanged in 2026, with a best-case scenario of 2% growth. Its share price has plunged by a quarter from a peak last year. Shoppers still snap up smaller items like gardening tools and paint. But they are not starting large projects such as kitchen and bathroom renovations—because the housing market is gridlocked. Dearer mortgages are partly to blame. Homeowners with pandemic-era fixed rates of 3% or below are reluctant to sell and abandon them, now that the average rate on a new 30-year mortgage has risen to nearly 6.5%. Such rates also put first-time buyers off. More than half of outstanding mortgages still had rates of 4% or less in the third quarter of 2025.

The more expensive mortgages are, the less buyers can afford to pay for a house. But “sellers are extremely reluctant to realise losses from their homes,” says Tarun Ramadorai of the London School of Economics. This has also frozen the housing market in Britain, where transactions remain subdued. In both places, homeowners’ loss-aversion has contributed to prices not moving much. Instead, their unwillingness to sell at a loss has caused sale volumes to collapse. Before the Iran war, America’s housing market looked ripe for a recovery. Unemployment was low, existing homeowners were sitting on near-record equity and affordability was improving, in part because of rising incomes. But the closure of the Strait of Hormuz has sent energy prices rocketing, threatening to drive up inflation and, in turn, mortgage rates. And so the housing market remains on ice. What might prompt a thaw? Some homeowners have little option but to sell up: those undergoing divorces, for instance, or moving for work. Home Depot, however, cannot rely on this trickle of transactions. So it is instead courting builders, who tend to spend more than the DIY crowd and now account for half of its revenue. Over the past few years, the firm has spent over $30bn acquiring wholesale distributors that cater to professional contractors. But for now, plenty of its tills remain empty—and offer a warning that America’s housing market is broken. ■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/05/20/economics-lessons-from- home-depot

Finance & economics | New oases Where expat escapees from Dubai end up Will they ever return? May 21st 2026 LIFE IN DUBAI used to be about as blissful as white-collar expatriate existence gets. The private schools are good, beaches pretty, flight connections plentiful and booze legal (so long as you are not Emirati or Muslim). Expats face no income tax; it barely rains; Russian oligarchs can mingle with Western bankers, Arab property moguls and Israeli entrepreneurs. All that remains true nearly three months after America and Israel attacked Iran across the Gulf. But Dubai’s advantages must now be weighed against the risk of Iranian missiles and drones raining down. On May 18th one hit an electricity generator at the sole Emirati nuclear power plant.