Middle East Conflict and its Effects on Global Logistics

Politics always play a major role in logistics, specifically supply chains. The conflict in the Middle East is no different. This conflict is majorly disrupting all forms of transportation including, air, ocean freight, and ground freight. The main impacts will be rising insurance costs, closures of civilian and commercial airports, and threats of major choke points being shut down.  

Israel’s Ben Gurion international Airport remains closed to civilian and commercial air traffic until further notice. There are exceptions, with various Israeli airlines conducting rescue flights. However, the situation is ever-changing with hourly assessments taking place to evaluate whether landing at the airport is safe. Additionally, the region’s surrounding airspace has seen several closures, including Iraq. Eastern Iraq is considered a critical corridor for Europe and Asia travel, specifically Singapore, Malaysia, and Bangladesh. Air France uses Iraq as one of its primary routes in their flight plans.Consequentiality, Iraq closing its airspace results in forcing carriers to reroute flights. Many international carriers are avoiding several other routes that would usually travel over Jordan and Syria as well, temporarily changing global flight routes.  

Another major issue lies with the uncertainty of the accessibility of the Strait of Hormuz, which is known as a vital choke point for global energy transport. The Strait of Hormuz transports 20% of the world’s oil. It is still unknown whether or not the strait will be closed. Bimco, the Baltic and International Maritime Council, one of the world’s largest international shipping associations representing ship owners, typically does not tell ship owners to avoid certain areas. However, the level of uncertainty in the Middle East has prompted Bimco to release a warning to ship owners regarding the Strait of Hormuz. Additionally the UK has already advised their merchant fleets to avoid the strait when possible. A Bimco representative mentions that in times of heightened security threats, freight rates and crew wages increase. In addition, In an event where there is a closure of the strait, barrels of oil could rise far above $100 a barrel. This would increase global energy prices, increasing shipping costs and creating significant supply delays.  

Insurance is also being majorly impacted by the conflict. Ships sailing through the Red Sea and Persian Gulf are facing significant cost increases for insurance. According to data from the world’s largest insurance broker Marsh McLennan, insurers are now charging 0.2%  of the ship’s value for journeys into the gulf, which is an increase from 0.125% prior to Israel’s attack on Iran. There has also been an increase in war risk insurance rates for the Red Sea, whereas, ships going into the port of Israel have more than tripled to 0.7%. Because of fear of closures of the Strait of Hormuz and increased risks traveling through the Red Sea, detours traveling around the Cape of Good Hope are becoming more common, resulting in additional costs surpassing $1 million per trip.  

In times of uncertainty, having a reliable logistics partner is more important than ever, at Barnhart Global our expert team is here to help aid you in navigating the ever changing landscape of international freight. Barnhart is a fully licensed and bonded Non-Vessel Operating Common Carrier (NVOCC), Ocean Transportation intermediary (OTI) and Ocean Freight Forwarder. We also manage the global shipping process by managing documentation, insurance, and carrier booking needs throughout the ocean freight forwarding process. Our team takes care of contractual commitments, shipping requirements and even commercial invoices. When there are changes in insurance and other requirements, you can focus on your business, as our expert team handles the rest.  

We have established relationships and contracts with steamship lines, vessels, and carriers. Additionally, we provide expedited air freight services, ensuring your cargo arrives at their destination on time, as early as the next day. We also offer cost effective deferred air freight for those who do not have time sensitive freight. When faced with uncertainty, rely on Barnhart’s expert team to ensure your shipments arrive safely, and efficiently without compromising quality of service.