Cement, Drugs, And Oil - How The Iran Conflict Could Disrupt Global Supply Chains

Authored by Andrew Moran via The Epoch Times (emphasis ours),

The conflict in Iran could have consequences for international trade that extend beyond oil and gas.

It has been less than a week since the start of the U.S.–Israeli operations in Iran, and oil tanker traffic in the Strait of Hormuz—a key global chokepoint for energy shipments—has come to a screeching halt. Approximately 200 oil tankers have been stranded in the Gulf, according to data from Lloyd’s List Intelligence.

The strait handles an estimated 20 million barrels of crude oil and petroleum products per day, with a majority being directed to Asia.

While Tehran has not officially shuttered the narrow waterway, it has been effectively closed by Western insurers, which have canceled coverage or raised risk premiums.

It is not only maritime commerce and energy that are being adversely affected by the conflict.

Planes carrying air cargo out of the Middle East have been grounded. Other vessels have started detouring around Africa’s Cape of Good Hope, a move that adds days and raises fuel costs to a trip.

The longer the war drags on, the greater the odds that it could bleed into the broader global supply chain, whether for consumer goods or construction equipment.

Key construction and manufacturing materials such as cement, concrete, and sand are produced across the Middle East. Seven percent of the global aluminum supply flows through the strait. Pharmaceuticals manufactured in India or natural-gas-based products produced in Saudi Arabia traverse the region.

A prolonged conflict in Iran would cause delays and potentially product shortages, leading to higher production and transportation costs.

The Containerized Freight Index has already climbed by more than 5 percent in the past month. In the liquefied natural gas market, shipping rates have increased by 650 percent to $300,000 per day, according to shipbroker Fearnleys.

These developments could revive broad-based price pressures at a time when aggregate inflation levels have been slowing despite the United States’ global tariffs.

The annual inflation rate in the United States is running at 2.4 percent.

Mitigating High Energy Prices

The administration has sought to thaw frozen trade and stabilize global energy markets by offering naval escorts and political risk insurance guarantees—coverage that protects companies against financial losses caused by conflict and hostile geopolitical environments.

It is a welcomed step, but industry players are still cautious, according to Stamatis Tsantanis, CEO and chairman of Seanergy Maritime.

“Shipowners and operators will need to see a clear, secure corridor established before confidence fully returns,” Tsantanis said in a note emailed to The Epoch Times.

“The priority for the industry is not just moving cargo, but protecting the lives of seafarers, the value of vessels, and avoiding what could become a major environmental disaster if a tanker were seriously hit in such a narrow and sensitive waterway.”

Uncertainty about the vital artery has contributed to this week’s spike in energy prices.

Crude oil prices are still surging, with a barrel of West Texas Intermediate approaching $80 on the New York Mercantile Exchange. Brent, an international benchmark for oil prices, is inching closer to $85 per barrel.

Natural gas has edged up to about $3 per million British thermal units. Gasoline prices and heating oil futures have risen by 9 percent and 37 percent, respectively, over the past week.

Even with security guarantees or an end to the conflict, restoring trade flows would still take time.

“Shipping has always adapted to geopolitical tensions, but restoring normal flows through Hormuz will depend on credible security arrangements that give crews, owners, and insurers the confidence that transit through the strait is genuinely safe,” Tsantanis said.

‘Magnitude of the Drag’

For now, market watchers are mainly concerned about the effects of rising energy costs on near-term inflation and growth prospects—and the Federal Reserve’s policy strategies.

“A brief spike in oil prices would have little lasting effect on inflation. Energy prices would need to be sustained higher over weeks or months before we see it push CPI meaningfully higher,” David Rees, global head of economics at Schroders, said in a March 3 note.

“However, higher sustained energy inflation would squeeze real incomes, weigh on growth, and raise doubts about whether central banks, such as the U.S. Federal Reserve, can continue easing monetary policy.”

The rule of thumb is that every $10 jump in oil prices shaves off 0.1 percentage point from gross domestic product growth and increases inflation by 0.2 percentage points.

Additionally, rising oil prices tend to have a lag effect in the broader economy, according to Sarah Wolfe, a strategist at Morgan Stanley Wealth Management. Consumption generally begins to slow two to three months after a price shock and remains tepid for five to six months.

“The magnitude of the drag depends on the duration and persistence of higher energy prices,” she said in a March 4 note.

The situation, meanwhile, could force the Federal Reserve and other central banks to reconsider easing efforts.

The Fed, facing an energy supply shock, is likely to keep interest rates on hold as officials assess the situation and watch the incoming data.

At a March 3 Bloomberg event, Minneapolis Fed President Neel Kashkari said the conflict has ignited uncertainty surrounding the outlook for policy and the economy.

“The question I think that we are wrestling with, and markets are wrestling with, is, how long is this going to ​last? How bad is it going to get? Is it going to look more like Russia–Ukraine, or is it going to look more like Hamas attacking Israel, ​and that’s going to have effects on monetary policy,” Kashkari said.

These conflicts can make the inflationary trajectory harder to predict, he said.

Futures market data indicate that traders have started pushing out the first quarter-point rate cut of 2026 to September, even as Fed Chair Jerome Powell’s term expires in May and the president’s new pick takes over the job.

But the brief Iran–Israel war in June 2025 underscored how resilient the global economy has become to Middle East shocks. Oil spiked above $82 a barrel after the United States and Israel struck Iranian nuclear sites, but prices slid back below $70 within months. Growth and inflation in the United States and other major economies were hardly impacted.