Could Iran War Trigger Bigger Trade Crisis Than COVID?

Amid escalating tensions in the region, analysts are questioning whether a potential conflict involving Iran could disrupt global trade more severely than the pandemic. The recent closure of the Strait of Hormuz has drawn parallels to supply chain breakdowns seen during the coronavirus outbreak and the U.S. tariffs introduced under Donald Trump. While the pandemic revealed the world’s reliance on China for manufacturing, Trump’s policies pushed companies to diversify their sources. Now, the Iran war has exposed another vulnerability: the fragility of energy and raw material supplies.

Experts highlight how quickly a blockage of critical corridors like Hormuz can send shockwaves through international trade. The International Energy Agency noted that last month’s disruption led to the loss of about 10% of global oil and a fifth of liquefied natural gas, marking the worst energy market crisis in history. Unlike the pandemic’s widespread demand collapse, this event has targeted supply chains directly, with energy and commodities facing the brunt of the impact.

“The pandemic exposed overdependence on a manufacturing hub, while Hormuz exposed overdependence on a transport corridor and energy inputs,” said Sebastian Janssen, a partner at New York-based Oliver Wyman.

During the pandemic, factories closed, ports backed up, and just-in-time logistics systems faltered. Yet energy prices remained stable. This time, non-energy trade has fared better, though rising oil, gas, and fertilizer costs have already forced governments to adjust inflation projections. Shipping routes have been rerouted around South Africa’s Cape of Good Hope, adding thousands of nautical miles and up to two weeks to voyages. War-risk insurance for Middle Eastern vessels has spiked, adding millions to transport costs.

Resilience in supply chains is proving tough to achieve, according to Janssen. “Scarcity effects are still spreading through multi-tiered networks,” he explained, warning that full stabilization could take months after the Strait reopens. A survey of 6,000 firms in 13 countries revealed nearly two-thirds of businesses fear continued disruptions and higher energy prices due to the war. The findings, published on April 8 by Allianz Trade, underscore a growing shift toward reshoring or nearshoring strategies.

“One way to avoid major choke points is to bring production closer to customers,” remarked Lisa Anderson, president of LMA Consulting Group.

Geopolitical risks, including wars and tariffs, have surged to the forefront of corporate concerns, surpassing levels seen in 2025. Companies that once prioritized efficiency over security are now recalibrating their approaches, driven by the dual crises of pandemic disruption and the ongoing Iran conflict. As the situation evolves, the question remains: will these shocks lead to lasting changes in global trade patterns?