Jaguar Freight | Client Advisory: The Iran Conflict and Emerging Impacts on Global Supply Chains

As the Iranian conflict enters its second week, consequences are continuing to emerge for supply chains. While still evolving, early developments are already affecting shipping operations, energy markets, and freight costs across the Asia-Europe and Asia-U.S. trades. More importantly, as we’ve learned from the Red Sea disruption over the past few years, problems in the region can have ripple effects around the world.

For companies in the United States and Europe that rely heavily on imports from Asia, the most immediate risks relate to container shipping capacity, routing decisions, and rising fuel costs. Here is what is happening right now.

Container Shipping Disruptions

Immediately from the start of the conflict, a number of global ocean carriers began limiting capacity to and from the Persian Gulf as the security concerns grew. In some cases, carriers have paused all bookings to the region, while others are restricting certain cargo types, including refrigerated containers.

Not surprisingly, these suspensions are not only affecting shipments destined for Gulf markets. Those of us in the industry recognize how interconnected container markets are and that disruptions in one region often cascade to other lanes.

One immediate and growing issue is the number of vessels and containers currently stuck inside the Gulf, which is presently estimated to be 1.4% of the global container fleet (and ~10% of deployed capacity that normally transits the Strait of Hormuz). While that figure may appear small, the sudden removal of this capacity can quickly tighten vessel space availability on other trade routes.

Additionally, ports across the region have experienced intermittent closures due to missile and drone attacks targeting infrastructure and vessels. Even major hubs such as Dubai’s Jebel Ali Port have faced temporary closures, and uncertainty remains high. Shipping lines are understandably being cautious.

With cargo being delayed or rerouted, transshipment hubs in Asia are already experiencing increasing congestion. The current situation closely resembles the early phase of the Red Sea crisis, when vessels suddenly diverted around the Cape of Good Hope and cargo began accumulating at intermediate ports.

Red Sea and Routing Implications

The conflict is also having consequences for shipping through the Red Sea and Suez Canal corridor. It’s a step in the wrong direction for shippers, unfortunately. Earlier this year, some carriers had begun cautiously returning vessels to the Red Sea after a long period of disruption caused by Houthi attacks.

However, the expanding conflict has renewed concerns. Houthi forces have warned they may resume missile and drone attacks on vessels linked to Western countries, but have not launched any significant attacks yet. As a result, shipping lines that had been considering returning to the Red Sea are once again avoiding the area and altering their routes.

If carriers continue to avoid the Red Sea and Suez Canal, Asia-Europe transit times will remain extended as vessels are forced to sail around the Cape of Good Hope, which adds 10–14 days to Asia–Europe voyages. Worsening the capacity crunch is that longer voyages tie up vessel capacity for extra days or weeks, effectively reducing availability and equipment globally and putting upward pressure on rates.

Fuel Prices and Freight Cost Pressure

Energy markets also reacted strongly to the conflict. Oil prices have surged from 30-60% with benchmark Brent above $100 per barrel (and briefly near $120) over the weekend.

The Strait of Hormuz is one of the world’s most important energy transit corridors, with roughly 30% of global seaborne oil exports passing through the narrow waterway. For container shipping, higher oil prices translate directly into higher bunker fuel costs, one of the largest operating costs for shipping lines. And such increases are typically passed through to shippers via fuel surcharges.

If oil prices remain elevated, companies should expect to see rising bunker adjustment factors (BAFs) and other fuel-related surcharges in the coming weeks. Combined with longer voyage distances due to diversions, fuel-related expenses will put additional upward pressure on ocean freight costs.

Air Cargo Capacity Tightening

The conflict is also affecting air cargo operations in the region. Several Middle Eastern airports have experienced disruptions from missile and drone attacks, causing many airlines to reroute flights away from affected airspace.

This is significant because major Middle Eastern hubs play a central role in global air cargo networks connecting Asia, Europe, and North America. Reduced availability and longer flight paths can tighten available capacity, pushing air freight rates higher at a time when many companies are relying more on expedited shipments to manage inventory (a trend that’s grown over the past few years).

Insurance, Surcharges, and Operational Risk

Maritime insurers have begun increasing war-risk premiums for vessels operating in the Persian Gulf and the surrounding waters. In some cases, war-risk coverage has been withdrawn entirely, forcing carriers to avoid certain areas.

As with the other potential cost increases we’ve mentioned, higher insurance ultimately feeds into freight rates and surcharges. In addition, satellite navigation interference and the clustering of vessels waiting offshore create additional operational risks for carriers, further complicating scheduling reliability.

Most shipping lines have also already implemented Emergency Freight Increases (EFI) and War-Risk Surcharges that can range from a few hundred dollars up to $4,000.

Outlook for Supply Chains

At this stage, the long-term impact on global supply chains will depend heavily on how long the conflict continues, the involvement of other countries in the Middle East and beyond, and what or who fills the leadership vacuum in Iran.

These short-term disruptions are primarily taking the form of temporary (hopefully) capacity shortages, localized port congestion, and rising freight costs. However, if the conflict continues or begins to affect other areas too, the impact could become significantly more disruptive.

For importers in the United States and Europe, the most likely near-term impacts include:

• Higher ocean freight rates and surcharges driven by fuel costs and capacity constraints

• Continued schedule unreliability and longer transit times on Asia-Europe routes

• Periodic congestion at Asian transshipment hubs

• Tightening in air cargo capacity and rising air freight costs

Actions Companies Can Take Now

While the situation is outside the control of any individual company, there are practical steps importers can take to reduce further disruption.

1. Increase supply chain visibility and shipment monitoring.
   Companies should closely track the status of shipments currently in transit or scheduled to move through affected regions. Working with your logistics partners to identify potential routing changes or delays early can help avoid downstream disruptions.
2. Review inventory levels and production timelines.
   Given the risk of longer transit times and schedule variability, businesses need to be sure current inventory levels are adequate in the face of potential delays. Alignment between yourself, suppliers, and transportation partners needs to be the priority. Proactive planning and adjustments to safety stock or reorder timing may help maintain continuity.
3. Plan for potential freight cost increases.
   Rising oil prices, tight capacity, and new surcharges are likely to push ocean and air freight costs higher in the near term. Companies should account for possible cost volatility in logistics budgets.
4. Coordinate closely with logistics partners.
   Not surprisingly, freight forwarders, carriers, and customs brokers are closely monitoring the evolving situation. Regular communication with your partners can help identify alternative routing options, prioritize critical shipments, and adapt to changing market conditions. The value of shipping technology to facilitate communication and visibility is of extra importance right now.

The Iran conflict is still evolving, and its ultimate impact on global supply chains will depend on the duration and scope of the conflict. Neither of which is known for now. What is clear is that shipping networks, fuel costs, and logistics capacity are already feeling the effects.

Compliments of Jaguar Freight – a member of the EACCNY