In Charts: How The Iran Conflict is Disrupting Global Trade

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(Bloomberg) — In the evening of March 1, an oil tanker turned off its transponder about 25 kilometers (15 miles) east of the emirate of Sharjah and disappeared into the murk of jammed signals over the Strait of Hormuz, the narrow chokepoint that separates the Persian Gulf from the open ocean. Ten hours later, its transponder winked back into life due north of Abu Dhabi, heading for Bahrain. 

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Only a handful of ships have made the run through the straits since last Saturday, when the US and Israel launched an air assault against Iran. Tehran retaliated, firing drones and missiles at targets across the Gulf. A Bloomberg analysis of shipping data from March 1-March 6 shows that traffic of merchant ships around the Strait of Hormuz has dropped more than 85% compared to the same period last year; about a fifth of these transits appear be under automatic identification system blackouts. 

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A week into the conflict, the impact on global trade is already significant, with major disruptions to shipping and air traffic reverberating through markets and pushing up prices for gasoline and fertilizer. More upheaval is likely, as the effects of attacks and shutdowns at some of the world’s busiest logistics hubs trickle through the global trade system.

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The United Arab Emirates and Qatar are focal points for maritime and air freight, handling large volumes of goods in transshipment between Asia, Europe and Africa through ports, free zones and small cities of warehouses around the airports. Close to Dubai’s airport, which in normal times handles more than 1,000 flights per day, is the International Humanitarian City, a free zone for international aid supplies, and hubs for the World Health Organization and other agencies.

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“It’s quite unique because it’s hitting a maritime chokepoint, but also an intermodal transport hub,” said Sarah Schiffling, assistant professor of supply chain management and social responsibility at the Hanken School of Economics in Finland. “The problem with a hub and spoke system is that if something disrupts your hub, the whole network is disrupted.”

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By Wednesday, more than 27,000 scheduled flights had been canceled across the region, leaving passengers and cargo stranded — although airlines, including Emirates, are resuming operations.

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A substantial proportion of all air freight travels as belly cargo in passenger planes, and while total volumes are far smaller than shipping, planes typically carry high-value goods, perishable items that can’t always survive being stuck in transit such as food, flowers and pharmaceuticals, and other time-critical products. The collapse of passenger air traffic during the Covid-19 pandemic reduced the amount of capacity, leading to spikes in the price of air freight. 

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The most visible market impact of the conflict has been on the price of energy. Around 20% of the world’s supply of oil and liquefied natural gas flows through the Strait of Hormuz. Oil and gas production facilities across the region have been hit by drone and missile strikes. Energy exporters are looking for alternative routes out of the Gulf, and several have shut down refineries as storage facilities fill up.