Will Iran War Reshape Global Trade More Than COVID?

With tensions escalating in the region, trade analysts are questioning whether the ongoing conflict could redefine global supply chains more profoundly than the pandemic did. Businesses have already begun recalibrating their strategies to safeguard financial stability against other geopolitical threats. The recent closure of the Strait of Hormuz by Iran has sparked parallels with the supply chain disruptions caused by the pandemic and the tariffs imposed by former U.S. President Donald Trump. During the pandemic, the world’s reliance on China for manufacturing goods like electronics and medical equipment was laid bare, while Trump’s tariffs accelerated efforts to reduce that dependency. The current crisis, however, underscores a different vulnerability: the swift impact of disruptions on essential raw materials such as oil, gas, and fertilizers across international markets.

The International Energy Agency highlighted the loss of about 10% of global oil production and a fifth of natural gas supplies as the most significant energy market disruption in history. While the pandemic caused widespread demand shocks and Trump’s tariffs prompted gradual shifts in sourcing, the Iran conflict has inflicted a sharp, localized blow to energy and commodity flows. “The pandemic revealed overdependence on a manufacturing hub, whereas Hormuz exposed reliance on a vital transport route and energy inputs,” explained Sebastian Janssen, a consultant at Oliver Wyman. During the crisis, factories closed, vessels queued at ports, and just-in-time systems collapsed. Yet, energy prices remained relatively stable, unlike the broader economic fallout from the pandemic. This time, non-energy trade has shown greater resilience so far.

“The combined effects of these events have fundamentally changed how companies evaluate risks,” said Lisa Anderson, head of LMA Consulting Group. “Firms now understand that supply chains cannot be taken for granted.” She added, “The Iran conflict demonstrates that this is not a one-time occurrence.”

Shipping companies have been compelled to implement urgent rerouting measures, similar to those seen in 2023/24 when Yemen’s Houthis targeted Red Sea vessels. Tankers that previously traversed the Strait of Hormuz now detour around South Africa’s Cape of Good Hope, adding thousands of nautical miles and up to two weeks to delivery times. Insurance costs for Middle Eastern routes have also spiked, increasing expenses for each shipment. These additional costs are already contributing to higher prices for energy, chemicals, and manufactured products. However, the financial strain is only one aspect of the challenge.

Sebastian Janssen noted that the full repercussions of the disruption are still unfolding through multi-tiered supply chains. “The scarcity caused by this crisis will take months to fully manifest and stabilize once the Strait reopens,” he explained. A survey of 6,000 firms across 13 countries revealed that nearly two-thirds are anxious about ongoing disruptions and rising energy and commodity costs. The findings, released by Allianz Trade on April 8, highlighted a surge in plans to adopt reshoring or nearshoring strategies, relocating production closer to domestic markets or more stable regions. This trend is particularly notable in Europe.

Anderson emphasized that bringing manufacturing near customers is a key method to avoid bottlenecks. “The Iran war has underscored the need to diversify supply routes and reduce exposure to single points of failure,” she said. Beyond the immediate Hormuz crisis, some adjustments in trade patterns may become irreversible. The survey noted that geopolitical risks, including wars and tariffs, have risen as the primary concern for two-thirds of firms, a sharp increase since 2025.