From Washington: The escalating conflict between the United States, Israel and Iran has transformed a strategic waterway into a shipping graveyard. What began as military strikes on 28 February has evolved into an effective closure of the Strait of Hormuz, one of the world's most critical maritime corridors. The consequences are rippling outward, stranding cargo and threatening to drive up costs for consumers and businesses across the globe.
The Islamic Revolutionary Guard Corps has issued radio warnings prohibiting vessel passage through the strait, reportedly trapping nearly 170 container ships and halting movement of 20 percent of the world's seaborne oil supply. The immediate effect has been stark and swift. The cost of shipping goods by air from Asia to Europe is up 45 percent since the war began, more than twice the increase for sending items from Asia to the United States, according to Ryan Petersen, chief executive of Flexport, a freight forwarder and logistics company.
The closure of several international airports in the conflict zone, including the world's busiest in Dubai, idled nearly one-fifth of global airfreight capacity, interrupting shipments of consumer electronics, pharmaceuticals and precious metals. The supply chain dysfunction extends well beyond energy shipments. Global automotive manufacturers face soaring energy and petrochemical costs, disrupted EV and ICE supply chains, and shipping delays that threaten vehicle production into summer 2026.
The human cost of rerouting is significant. Vessels that once transited the Suez Canal now face months-long voyages around the Cape of Good Hope. Re-routing via the cape adds approximately 10 to 14 days to transit times for vessels travelling between Asia and Europe or the Americas. For manufacturers relying on just-in-time inventory systems, this creates genuine operational pressure. Buffer inventories, already thinned by years of lean manufacturing philosophy and post-pandemic supply chain reform, are not sized for a fortnight of additional transit time in either direction.
Major shipping companies have begun imposing emergency surcharges to compensate for the heightened risk and disruption. Carriers are set to implement "as many and as high surcharges as humanly possible" as the industry faces shipping disruptions in the Middle East. Beyond the fees, there is the practical chaos of cargo rerouting. Maersk and MSC had already stopped accepting bookings to Gulf ports, with Hapag-Lloyd and CMA CGM following with similar suspensions.
Some of the conflict's most visible casualties are high-profile infrastructure projects. Alcatel Submarine Networks, the French state-owned company responsible for installing Meta's 2Africa undersea cable, has stopped operations in the area because of security concerns, with its cable-laying vessel, Ile De Batz, now stranded near Dammam in Saudi Arabia. Two sections of the 2Africa system remain unfinished, the "Pearls" segment in the Persian Gulf and another stretch in the Red Sea, with Meta halting work in the Red Sea four months ago after Houthi attacks on ships and difficulties obtaining installation permits.
How this episode plays out will depend largely on whether the conflict broadens or contracts. According to shipping industry analysts, "we are probably looking at at least six months into the future before anybody's going to start contemplating doing this again, and that is if we stop the Iranian war basically today." For Australian consumers and exporters, the immediate concern is agricultural. Disruptions could affect Australian and other agricultural producers, particularly through fertiliser shipments that transit the Strait.
There is a genuine tension at play here between the desire to restore stability in the Middle East and the economic pain that extended conflict creates. The United States has stated it will facilitate insurance and naval escorts to keep vessels moving through the strait, though implementation remains uncertain. The fundamental challenge is that commercial operators cannot easily quantify their risk exposure in an active conflict zone, and insurers are accordingly cautious.
Reasonable people can debate the strategy that led to the current escalation. What is beyond dispute is the practical consequence: the world's supply chains are now waiting for political actors to decide whether de-escalation is possible. Until that question is answered, the financial impact will continue to mount, passed eventually to exporters, importers and consumers who had no role in the decisions that created it.