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  April 18th, 2024 | Written by

The Impact of Middle East Unrest on Global Logistics

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The recent escalation of tensions in the Middle East has sent shockwaves through the global logistics sector, raising concerns about the safety and stability of both sea and air freight transport in the region. Beyond container cargoes, various types of cargo are now under threat, amplifying the challenges faced by the industry.

A significant incident occurred when the MSC Aries, a vessel with a capacity of 14,300 TEUs flagged in Madeira, fell victim to an attack by Iranian troops who landed via helicopter onboard the vessel. This assault occurred as the MSC Aries was departing from the port of Dubai, indicating vulnerabilities in the logistics infrastructure not only of the UAE but also of the broader Gulf region. The vessel’s affiliation with Israeli businessman Eyal Ofer’s Zodiac Group has been highlighted in media reports, suggesting a targeted attack due to these links.

The situation has not only affected maritime routes but has also impacted air travel, with several airlines cancelling services to Israel, Lebanon, and Tehran due to the conflict between Israel and Iran. While UAE authorities and Gulf-based airlines assert the security of air operations, the overall sentiment remains affected.

Looking ahead in the short and medium term, the conflict’s repercussions on the logistics sector are significant but complex. Potential impacts include fluctuations in pricing, with disruptions to ports in the UAE potentially driving short-term rates higher. Additionally, cargo volumes passing through the Suez Canal may further decline, especially if disruptions spread to energy cargoes. The threat to ports in the Gulf, particularly from Iranian actions in the Strait of Hormuz, adds to the uncertainty.

Oil cargoes may also face challenges, with a potential return to the ‘Tanker Wars’ of the 1980s if the situation escalates further. Moreover, disruptions in the Gulf could impact airfreight operations, affecting supply chains globally. India, in particular, is vulnerable to disturbances in the region, given its proximity and reliance on trade routes through the Middle East.

The crisis remains highly unpredictable, with possible outcomes ranging from de-escalation to further escalation. The involvement of shipping and airfreight in the conflict necessitates the creation of short-term alternatives to mitigate risks, such as the utilization of the ‘Cape route.’ However, these measures may come at a high price in the immediate future, highlighting the challenges faced by the global logistics sector in navigating through this turbulent period.