Xeneta: Israel-Iran Conflict Threatens Safety and Stability of Ocean Supply Chains

Peter Sand, Xeneta Chief Analyst, shared insights following the escalation of the Israel-Iran conflict.

“Geo-politics is once again threatening the safety and stability of global supply chains so we must hope for de-escalation in the conflict between Israel and Iran, with concerns it could see a de-facto closure of the Strait of Hormuz—a vital entry point for container ships calling at ports such as Jebel Ali and the wider Arabian Gulf region," said Sand.

“Any closure of the Strait of Hormuz would see services re-routed, with increased reliance on India West Coast ports for connecting the Far East to Indian sub-continent. The inevitable disruption and port congestion, as well as the potential for higher oil prices, would cause a spike in ocean freight container shipping rates, with carriers likely also pushing for a ‘security surcharge’ on these trades in the coming days.

“This escalation also makes a largescale return of container ships to the Red Sea seem less likely, a situation which continues to have a major impact on ocean container shipping rates 18 months after Iran-backed Houthi Militia in Yemen began attacking vessels in the region.

“Average spot rates from Far East to North Europe are up 62% since December 1, 2023, just before escalation in the Red Sea, while average spot rates to US East Coast—another trade that would ordinarily transit the Suez Canal—are up 165%.”