Situation Overview
Tensions between Israel and Iran have escalated, raising serious concerns over the stability of key logistics routes in the Middle East. A closure or restriction of the Strait of Hormuz, a critical chokepoint for global trade, would significantly disrupt regional and global supply chains. However, “Security analysts from across the industry continue to view any closure of the Strait of Hormuz to be an extreme scenario that is unlikely, despite a strong media narrative and rhetoric from Tehran suggesting that it remains a possible outcome.” (Lloyds List)
- The Strait handles ~20% of global oil and a major share of containerized freight.
- As of this advisory, the Strait remains open, but vessel traffic has slowed with heightened security measures in place.
Ocean Freight Impact
If access to the Strait is restricted or closed:
- Over 30 million TEU/year of Gulf port capacity (notably Jebel Ali, Khalifa Port and Dammam) could be disrupted.
- A potential de facto closure would cripple Jebel Ali (132 services) and Abu Dhabi (55 services), which handle 30% of Gulf container trade.
- Alternative regional ports, Sohar, Khor Fakkan, Fujairah, Jeddah, Yanbu, could potentially offer additional capacity as much as 10 million TEU (based on design capacities) but would require time to scale up significantly in many cases.
- Jebel Ali and Khalifa Port transshipments would need to be rerouted.
- Dammam cargo may be redirected to Jeddah, despite Red Sea complications, with significant inland trucking required for this and other diversions from the Gulf ports.
- Some cargo may be rerouted via the UAE to Oman or KSA by road, and our team is actively evaluating additional land options.
- Carriers have begun contingency inquiries at ports such as Sohar and Jeddah, but no firm plans or surcharges have been announced.
- Heavy reliance on India's west coast ports (Mundra, Nhava Sheva) for Asia-Europe transshipment.
- Congestion risks: Indian ports operating at 70-80% capacity may buckle under diverted volumes.
Financial Shockwaves:
- Rate Projections: Base case +15-20% Asia-Europe; escalation could trigger +40-50%.
- New surcharges: "Gulf Security Surcharge" is expected within days.
- Insurance: War risk premiums now $0.75-$1.25/container, with stricter clauses.
Inland Logistics Impact
- Transit times could increase dramatically as trucking shifts from hours to days.
- Expect intense pressure on land border crossings and staging facilities for rerouted cargo.
Air Freight Impact
- Following recent Israeli airstrikes on Iran, regional airspace closures (Iran, Israel, Iraq, Jordan, etc.) have impacted major airlines, forcing rerouting and cancellations.
- Air freight could likely surge for urgent shipments, but traditional sea-air hubs like Dubai will be compromised.
- Full air transport may become the only viable alternative for some cargo flows.
PSA BDP Mitigation Options
To help maintain supply chain continuity, PSA BDP offers the following support:
- Rerouting & Cargo Staging
- Use of PSA terminals in Mersin (Türkiye) and Singapore for cargo staging and rerouting flexibility.
- Inland Diversion Solutions
- End-to-end trucking from affected Gulf ports to alternate non-Strait ports, supported by PSA BDP's owned offices in all major alternative gateways.
- Air Freight Alternatives
- Flexible solutions include: Alternate hub selection, Ad-hoc charter flights, and scalable door-to-door services.
Customer Recommendations
- Engage early with your PSA BDP representative to assess risk scenarios and routing options.
- Pre-position inventory closer to destination markets where possible.
- Diversify away from Gulf transshipment where possible.
- Explore modal shifts, particularly for critical or time-sensitive cargo.
- Model worst-case rate scenarios (+50% on Asia-Europe).
- Carefully review your insurance coverage for exclusions such as acts of war or military action that could limit coverage. Request transparent risk assessments from insurers.
- Stay informed through regular updates from PSA BDP.
PSA BDP remains committed to delivering resilient and responsive solutions. We are closely monitoring developments and will continue to update you as the situation evolves.
Please contact your local PSA BDP team for tailored support and scenario planning.
