Conflict transitions from logistics disruption to destruction and dislocation

“The Middle East conflict has transitioned from supply chain disruption to destruction and dislocation with no reliable resolution in sight and a painful legacy already being lived with,” according to the head of the Global Shippers Forum (GSF). In an interview with AJOT, James Hookham, director of the representative body which has members in 25 countries, elaborated on the depressing picture he paints, underlining that for shippers the crisis is “much, much bigger than just inventory and trade flows and will take months to recover from.”

More Surcharges

Just over one month ago, he had highlighted “the flurry of surcharge announcements” from ocean carriers and airlines that followed the beginning of the hostilities, driving up shippers’ operating costs considerably.

“The initial surcharges were for ‘end of voyage’ and diversions of cargo already on the water to other ports. This was in weeks one and two of the conflict. Fuel and War Risk surcharges followed in weeks two and three. The reality of course is that there have been no direct services to the Gulf to add surcharges to in the weeks since.”

He said shippers are now seeing Peak Season Surcharges on some non-Middle East routes apparently because of the disruptive effects on the network, and consequential congestion at ports to where ships were diverted.

“On top of these are fuel surcharges due to the price increase and shortages in some ports. How these relate and feed into quarterly Bunker Adjustment Factor calculations remains to be seen. One of the reasons shippers hate surcharges is that they never really know what they are actually paying for.

“Airlines were the first to forecast shortages, with some predicting service cancelations over the summer, as well as higher fares and surcharges. Other sources of fuel are available, not least in the U.S. but this will raise fuel prices in home markets as well as domestic buyers (airlines) bid against foreign buyers for a diminished supply.”

Shippers should also be on the lookout for ‘price gouging’ by certain parties looking to take advantage of crisis conditions.

Real Pain Ahead

Hookham warned that fuel shortages are going to start to hit western economies very soon.

“The last tankers to leave the Gulf before the missiles started flying arrived at destinations around 10 days ago so once those supplies have run down, we should expect some real pain in European economies as fuel prices rise. (Fuel surcharges on summer holiday flights, for example).

“Self-sufficiency is no comfort either (at least not in ‘open’ economies). The high price of gasoline in the US shows that even US fuel buyers have had to pay ‘world’ prices otherwise US traders will sell to higher bidders overseas. China, on the other hand, imposed fuel export restrictions on day two or three of the crisis. The EU has urged its member states not to follow suit.

Destruction of infrastructure

Compounding the fuel shortages and price inflation is the widespread destruction of fuel infrastructure, both Iranian and of other Gulf exporters, that will take months if not years to repair and replace, Hookham noted.

“The market will doubtless adjust if gas and oil remain at these elevated prices so other supplies may come on stream, but it does seem fuel costs and availability are going to be a big factor in carrier operations for the rest of 2026 and into 2027. Shippers should check their contracts for how they stand and get some independent data to understand what’s going on.”

Indicative of shortages worsening, Hookham pointed to several countries which have or are considering the introduction of fuel rationing.

“GSF members in Sri Lanka, New Zealand and Australia are experiencing this firsthand and we should expect the list of countries who are rationing to grow. There’s a real prospect of a lack of fuel for domestic transport operations, not to mention the wider impact on business continuity; not just in terms of how containers can get to the port but more fundamentally: Can staff get to work? Will the lights stay on? Can food be distributed?”

Alternative Routings

Hookham also shed some light on the contingency plans that have been drawn up to compensate for the closure of the Strait of Hormuz.

“There have been commendable efforts by forwarders and some shipping lines, which have largely gone unnoticed, to set-up alternative ways for imports into and exports out of the Gulf states via Turkey and Iraq or via the Red Sea ports of Saudi Arabia. None of these are simple and all are expensive. What we are not hearing much about either about are the impending shortages of everyday goods in the Gulf states.”

US Blockade

As to the US blockade of Iranian ports, Hookham said: “The real test for me will be the next Iranian oil export to China and how Beijing reacts to either a US ‘toll’ based on the value of the product, or a veto on it leaving the Gulf at all. Indeed, I wouldn’t be at all surprised to see a ‘contribution to expenses’ being required of all ships passing through the Strait for a period once the blockade is in place and the international sea lanes are cleared of mines. Call it ‘Protection’ money?”