The ongoing Iran war has not only disrupted oil tanker movement in the Strait of Hormuz, but it’s also causing major impacts on the global supply chain. This extends beyond just oil, affecting industries such as pharmaceuticals, semiconductors, and fertilizers.

According to Patrick Penfield, a professor of supply chain practice at Syracuse University, the conflict is like a long train with many cars, where one derailment can have a domino effect on the rest of the supply chain. Currently, approximately 4% of global ship tonnage is idle inside the Persian Gulf, and 1% is waiting outside ports in the United Arab Emirates and Oman. This disruption has led to higher costs and delays for products that are shipped through the Middle East, such as petrochemical feedstock, nitrogen fertilizers, and pharmaceuticals from India, and semiconductors and batteries from Asia.

In addition to the constraints on the Strait of Hormuz, there are also disruptions in the Red Sea and Suez Canal, which have just begun to see more transit after years of instability due to Houthi attacks on ships. Air cargo has also been affected, with closed airspace and airports in countries such as the UAE, Qatar, Bahrain, Kuwait, Iraq, and Iran, leading to stranded passengers and cargo.

The Middle East is a key route for air cargo, especially for high-value and perishable goods such as pharmaceuticals, electronics, and produce, which account for 35% of the world trade value. With the closure of these airports, there is a potential for disruptions to the economy if these sensitive shipments do not arrive or have to be rerouted. This has also led to an increase in air cargo costs due to reduced capacity, increased demand, and surcharges.

Maersk, a leading shipping company, has stated that it expects air freight rates to rise due to capacity constraints. However, despite the disruptions in the supply chain, the industry is becoming more resilient and adaptable. Michael Goldman, general manager of North America of CARU Containers, stated that the industry has faced other major disruptions in recent years, such as the COVID pandemic and other Middle East conflicts, and has become more nimble in response.

Overall, while the Iran war has caused significant disruptions in the global supply chain, the industry is constantly adapting to these challenges and finding ways to continue operations. However, as the conflict continues, there is a possibility of shortages and price increases for a wide range of goods. President Donald Trump has proposed a plan to get oil and trade moving again through the Strait of Hormuz, which includes providing political risk insurance for tankers and potentially escorting them through the Strait if necessary.