Iranian Conflict Update: Key Impacts on Air, Ocean, and Road Freight
We are now more than three weeks into the Middle East conflict, with tensions continuing to rise. Below is the latest overview of the impact on global logistics.
The situation remains highly fluid, and further escalation is likely to drive additional disruption across global supply chains. At present, the most immediate and significant impacts are being felt in fuel costs and air freight capacity.
Air Freight
Air freight has been the most heavily affected mode of transport to date. The Gulf hub system plays a vital role in global cargo flows, particularly for trade between Asia and Europe. Key hubs such as Dubai, Abu Dhabi, and Doha typically serve as major trans-shipment points, all of which are now severely impacted by the ongoing crisis.
Global air freight services are under increasing strain, largely due to rapidly rising fuel (bunker) costs. In addition to direct disruption across the Middle East, the Asia–Europe corridor has been particularly affected.
Reduced capacity, coupled with longer and less efficient routing, has driven a sharp increase in freight rates and heightened volatility in spot pricing. This instability is expected to continue as airlines adjust their networks and capacity in response to the evolving situation.
Ocean Freight
With the Strait of Hormuz effectively closed, shipping services into and out of the Gulf have largely ground to a halt. While base ocean freight rates remain relatively stable for now, rising bunker costs are beginning to impact all major trade lanes.
The Asia–Europe route has been somewhat shielded from immediate disruption, as many services had already been rerouted around Africa over the past two years. However, with market rates having been relatively low, carriers are now pushing for General Rate Increases (GRIs), which may place upward pressure on costs in the near term.
Road Transport
Fuel costs are having a direct and immediate impact on road transport. In the UK, diesel prices have already risen by an average of 17%—approximately 24 pence per litre at the time of writing—and continue to climb daily. As a result, fuel surcharges are being widely applied and are increasing rapidly across both domestic and international road transport.
Insurance
Cargo insurance in the Gulf region has entered a critical phase. Many major insurers have withdrawn war risk coverage entirely, while others have ceased offering insurance for vessels operating in the Gulf.
Globally, insurance premiums are rising, with war risk surcharges increasing most significantly. Insurers are also reassessing definitions of war exposure, which may result in broader exclusions and higher costs. In this environment, businesses are strongly advised to review their insurance policies carefully to ensure adequate coverage under current conditions.
For further information or support, please do not hesitate to contact a member of the Killick Martin team.
