As Iran-Israel Conflict Hampers Global Trade, Logistics Sector Gears Up To Tackle Challenges
The ongoing geopolitical tensions between Iran and Israel are causing ripple effects throughout the international trade landscape, particularly impacting logistics and maritime operations. With both nations engaged in brinkmanship, concerns about the stability of trade routes, shipping, and air freight costs have intensified.
The conflict has the potential to significantly affect air freight operations due to airspace closures, heightened security measures, and market instability. Heightened security protocols at airports and cargo facilities are complicating air freight logistics, leading to increased processing times and costs. Delays in the export to Europe are anticipated, and if the conflict persists, crude oil prices could escalate, directly impacting the prices of various goods.
Additionally, there is a risk of disturbances in crucial maritime chokepoints, prompting proactive measures from the logistics sector to safeguard goods. These measures include diversifying transportation routes, bolstering security measures, and utilising technology for real-time shipment monitoring. By prioritising resilience and adaptability, the logistics sector aims to mitigate risks and uphold the efficiency of global supply chains amidst geopolitical uncertainty.
The Logistics Sector Responds
The logistics sector in India is taking strong steps to ensure the safety of the cargo and time bound delivery. Sandeep Chadha, Founder & CEO of Warehouster, highlighted the intricate nexus between geopolitics and global commerce. "The Iran-Israel conflict highlights the intricate link between geopolitics and global commerce. Prioritising supply chain diversification, risk management, and diplomatic resolutions are vital amidst rising tensions. The logistics sector must fortify security measures and adopt advanced tracking technologies to ensure safe transit of goods,” says Chadha.
Pushpank Kaushik, CEO of Jassper Shipping, emphasizes that the Iran-Israel conflict profoundly affects international trade, with potential freight cost increases of 40-60% and up to 20 days of additional delay. He warns of heightened piracy risks and economic turmoil for India due to its heavy reliance on imported crude oil. To stabilise the situation and safeguard the stocks, Pushpank Kaushik suggests, “Ensuring the choice of safe routes, keeping track of the conditions, and planning the optimal routes help to avoid accidents as well as delays. By installing the latest security tools like collision avoidance systems, backup cameras, and blind-spot monitoring the ships can make a whole magnitude of difference. Further, Proper ship maintenance is also important for logistics safety and can be ensured by regular inspections, servicing, and repairs for keeping ships in optimal condition. ”
Akshay Hegde, Co-Founder of Shakedeal, discusses the impact of the conflict on established supply chain routes between India and Europe, emphasising the need for alternative trade routes and reducing dependency on volatile regions. “The Iran-Israel conflict disrupts established supply chains, forcing Indian businesses to resort to costly air freight and facing delays of up to 20 days. Geopolitical uncertainties may deter investors, impacting new projects and the Indian Rupee's value. Safeguarding goods involves accelerating Chabahar Port development, facilitating alternate trade routes, fostering ties with Israel, and engaging in diplomatic dialogues for stability," says Hegde.
Jitendra Srivastava, CEO of Triton Logistics & Maritime too says that the Iran-Israel tension has significant repercussions for international trade, especially logistics and maritime operations. “Air freight operations face potential disruption due to airspace closures and heightened security measures, leading to increased costs. The logistics sector is taking proactive measures to safeguard goods by diversifying transportation routes, enhancing security, and utilising technology. Prioritising resilience and adaptability, we aim to mitigate risks and uphold global supply chain efficiency amidst geopolitical uncertainty."
Insights On Geopolitical Dynamics
Prof. Faisal Ahmed, a professor of international business and geopolitics at the FORE School of Management, New Delhi provides insights into the geopolitical dynamics driving the conflict and its potential implications for international trade, including supply chain disruptions and increased logistics and insurance costs.
“Iran is strategically an ally of both China and Russia. So, the Iranian attack on Israel opens up a two-front war for the United States and North Atlantic Treaty Organisation (NATO) to back Ukraine on one hand, and Israel on the other. Significantly, last year, Iran has already become a full member of the Shanghai Cooperation Organisation (SCO),” says Prof Ahmed.
He adds, “We need to closely watch the geo-economic uncertainty emanating from this conflict. The Iran-Israel conflict, if escalated, can lead to obstacles in the mobility of cargoes along the Strait of Hormuz, a strategic choke point connecting the Persian Gulf with the Gulf of Oman. There will be supply chain disruptions and impact on India-UAE trade which is on a growth trajectory owing to the newly signed free trade agreement between the two countries. Importantly, given that other countries of the region e.g. Jordan is also embroiled in this conflict, some of the sectors that are most likely to be affected in the region in the short-term include oil and gas, aviation, hospitality, small and medium enterprises that are connected to regional and global value chains. In fact, logistics and insurance costs will also increase, thus leading to higher trade costs.”
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