The global supply chain is currently holding its breath due to the recent escalation against Iran. Despite the possible (but not necessarily likely) closure of the vital Strait of Hormuz, industry experts still think that sea shipping will remain the safest option. This is especially true if the attacks on Iran, led by the United States and Israel, no longer target only nuclear facilities.
Attacks “aimed at the illusory ‘regime change’ means that anything is a target, and hitting railways is easier than hitting road infrastructure”, said transport expert Kris Kosmala. Thus, sea transport should remain the main mode of transport in the area, which is exceptionally important for the world’s gas and oil supply chain, Kosmala highlighted. In other words, the main disruptions would be caused by the U.S. and Israel attacking Iranian infrastructure rather than Iran blocking the Strait of Hormuz.
Kris Kosmala is a seasoned expert in maritime logistics and digital transformation. He currently serves as a Partner at Click & Connect, a consulting firm specialising in international logistics. Previously, he held the position of Director of Smart Port Digital Services at Royal HaskoningDHV, where he focused on applying advanced IT solutions to port and terminal operations. Kosmala has also served as Vice President for Asia at Quintiq, a supply chain planning and optimisation software provider. Kosmala holds an MBA in Strategy and Entrepreneurship from the Australian Graduate School of Management (UNSW Business School).
Closure of Strait of Hormuz is not likely
Iran could decide to close this vital artery as a retaliation to the recent attacks orchestrated by the U.S.. However, the possibility of this happening remains low, as many think it would lead to an economic suicide for Teheran. “Sometimes, the threat is as potent as the actual action”, Kosmala added, saying that the country “will not do anything extreme like what the Houthis originally did shooting at ships crossing Bab al-Mandab”.
The Strait of Hormuz is the world’s most critical oil checkpoint. Around 20% of the oil consumed globally needs to cross it, and it is especially important for Asian countries including China, India, Japan and South Korea. For example, China imports 90% of the Iranian oil meant for exports. The Strait of Hormuz, however, is also very important for other countries in the area (Saudi Arabia, Oman and UAE), which rely on it to export their oil.
Worse consequences for Europe than China
Consequently, fully closing this passage remains an unlikely scenario, Kosmala underlined, as it would create tensions that Iran wants to avoid. “Just like the access to the Suez Canal is available to Chinese ships without worries, similar politics will play out here. Friends will always be spared the risk and the stress”, he commented.
The same cannot be said for Europe and its economy. “That has been already disrupted as European imports of oil and gas keep paying higher insurance premiums and European exports to the Gulf countries have to travel around Africa or in smaller quantities on smaller ships traversing Suez”, Kosmala claimed.