Middle East turmoil hits logistics

While only a few days old, the current conflict between the US, Israel and Iran has triggered a series of reactions in the markets.

War risk has meant significant changes to global supply chains and triggered a repricing in global energy markets in particular. These factors are impacting the cost of fuel, shipping and air freight rates.

The consequences of this will be felt soon by consumers and businesses. Whether this is a sharp, short-term shock with more limited macro-economic implications for the UK, or the precursor to a longer period of much more economically damaging price volatility, depends on how long and how widely the war plays out across the region.

While the Strait of Hormuz is not physically closed, many shipping lines are understood to be diverting traffic away from the area, including Maersk, Hapag Lloyd and CMA CGM. According to the Global Shippers Forum, on 27 February hull insurance policies for ships transiting the Persian Gulf and the Gulf of Aden were cancelled by P&I Clubs, with cover only available at sharply higher premiums. The Baltic Dry Index increased by 2.2% from Friday 27 February to Monday 2 March, reaching its highest level since 15 December.

The Suez Canal remains open, but its proximity to Israel, coupled with the regional spread of the war, has already led to the reported diversion of some shipping around the Cape of Good Hope. For routes between Asia and Europe this means a typical delay of between 10 and 14 days and significant additional fuel costs, as it is an increase of roughly 6,000km.

Approximately one fifth of the world’s oil supplies normally move through the Strait of Hormuz every day and with this shipping corridor disrupted, the global price of oil is climbing. Crude oil prices have increased steadily since their initial spike on Friday 27 February. This elevated level will likely remain as long as there is disruption in the Strait of Hormuz. On previous occasions involving disruption (although the current situation is unprecedented in recent times) prices of crude oil have increased to over $100 per barrel. However, it has not yet reached the previous highs (we are at approximately $75 for WTI and $83 for Brent, at the time of writing). This is in part due to the OPEC+ agreement to increase production by 206,000 barrels of oil per day from April.

From Friday 27 February to Monday 2 March, the average UK diesel pump price increased by only 1.3%, to reach 142.7 ppl according to the RAC Foundation. In contrast, wholesale diesel prices increased by 6.5% over the same time period, from 108.27 to 115.29 ppl.

The crisis in the Middle East has escalated beyond prior Red Sea disruptions, with several key ports on the eastern side of the Gulf closed or partially inaccessible. The effect of the most recent Red Sea crisis was that vessels had to reroute to avoid the Suez Canal while ports remained operational, but the current situation is more severe, as both port access and inland connectivity are affected.

According to transport economists MDS Transmodal, transit volumes currently remain largely stable due to rerouting, but gateway volumes are the primary driver of disruption. Operational constraints, including congestion at alternative ports (such as Salalah, Colombo, Singapore, and European hubs) and limited inland connectivity, are likely to increase delivery times and costs and there is a lack of secure alternatives.

The Middle East is also a vital region in the international air freight network as a major hub for long haul flights, which have been disrupted by flight cancellations over the weekend. According to the International Air Transport Association, the Middle East accounted for 13.2% of world air cargo in January 2026. If the disruption caused to the flow of air freight through the region’s hub airports continues, this will limit route options and increase volatility in the cost of transporting goods via cargo planes and belly hold. ‘Just in time’ logistics operations could be severely impacted, as air freight performs a key role in some supply chains, with high value tech goods, perishables and pharmaceuticals particularly vulnerable.

Rising energy prices will also increase the prices paid for goods that use fuel and gas intensively as their inputs. For example, the future price of Liquid Natural Gas (LNG) doubled from Friday to Tuesday. LNG is a major input in fertilisers, which may impact the price of food in the longer term. But it is also an input to the manufacture of AdBlue, used to comply with more recent Euro exhaust emissions standards.

This upward price pressure may also influence inflationary forecasts going forward. At the beginning of the year, the majority of forecasters were predicting two or three interest rate reductions over the course of 2026. The latest developments have led to a more cautious outlook for the rest of the year, with many now predicting a maximum of one rate drop over the next three quarters. If this happens, the amount paid to service debt levels will remain higher for longer than businesses initially anticipated, together with ongoing difficulties in securing finance for many.

Previous crises have demonstrated the resilience of global trade networks but the combination of inaccessible ports, limited inland connections, and longer routes will put pressure on logistics. Coupled with inflationary effects from higher energy and freight costs, and the potential for delayed deliveries, a longer-term conflict could feed through to lower global GDP growth and trade flows.

Logistics UK will be sharing regular updates on the conflict and subsequent impact on routes, oil and fuel, and freight rates to help members stay informed.

Members can find out more information here.