As the war in the Middle East enters its fifth week, it remains unclear whether ceasefire negotiations between the U.S. and Iran are taking place and if they are, how much progress both sides have been making towards a peace deal.
Over the weekend, thousands of additional U.S. troops arrived in the region, while officials at the Pentagon are rumored to be preparing for a weeks-long ground offensive in Iran. According to reports, a ground offensive would likely involve military raids conducted by conventional infantry troops as well as special operations personnel but is not expected to amount to a full invasion of Iran.
In a recent interview, U.S. President Donald Trump suggested that the U.S. could take Iran’s oil and seize control of Kharg Island, the country’s main oil export hub, but did not specify how the U.S. would accomplish either of these objectives.
Meanwhile, missile and drone strikes have continued across parts of the Middle East over the last couple of days. In a notable escalation, the Houthis, an Iran-backed militia based in Yemen, entered the conflict on March 29 when the group fired a missile towards Israel for the first time since the war began.
Iranian forces continued to conduct strikes on targets in Israel as well as several Gulf countries, including Saudi Arabia, Kuwait, Bahrain, and the United Arab Emirates, while the Israeli military attacked alleged Hezbollah infrastructure in Lebanon’s capital Beirut and military infrastructure in Iran’s capital Tehran.
Middle East Risk Scenarios
Scenario 1: Further escalation of war with potential of wider regional conflict
Despite the possibility of ongoing ceasefire negotiations between the U.S. and Iran, the risk of an escalation appears to be higher than ever as the conflict enters its fifth week. Not only does Iran continue to fire drone and missile strikes on a number of countries, the Houthis, a Yemen-based militia backed by Iran, attacking Israel a few days ago increased the risk of the conflict turning into a much wider regional war substantially. Meanwhile, thousands of additional U.S. troops arrived in the Middle East over the weekend, which could lay the foundation for a ground offensive into Iran in the coming weeks.
President Trump’s extended deadline to reopen the Strait of Hormuz is now set to expire on April 6, barring another extension by the president. President Trump has since reiterated his intension to destroy Iran’s power plants, as well as the country’s oil wells and oil export infrastructure if a ceasefire deal cannot be reached soon.
If Iran follows through on its threat to target critical infrastructure in the region in retaliation for such attacks, many of the Gulf countries could be forced to take a more active role in the conflict to defend their citizens and critical assets.
According to recent reports, the United Arab Emirates is stepping up efforts to convince the U.S. and other allies in Europe and Asia to reopen the Strait of Hormuz by any means necessary, including military force.
Authorities in Saudi Arabia are also said to be considering taking a more active role in the war in response to Iran’s attacks on the country’s energy infrastructure. Such an escalation could have devastating consequences for business and logistics activities in the Middle East and beyond for months, if not years, to come.
An uptick in drone and missile strikes in the region would likely result in flight operations in and out of the region grinding to a halt again, tightening already limited regional air cargo capacity further. Air cargo rates, which have spiked since the beginning of the war, would likely continue to climb as a result.
An escalation of the fighting would also worsen the operating environment for ocean shipping further as more vessels currently stuck in the region could become targets of military strikes, while the Strait of Hormuz would remain closed indefinitely for the majority of ships. In recent weeks, Iranian officials have allowed a limited number of vessels linked to countries the Iranian government considers friendly to transit the waterway but authorities in Iran may choose to close the strait completely to maintain diplomatic and economic leverage amid an escalation of the conflict.
Lastly, a military escalation would cause significantly more damage to the region’s critical energy, air and ocean transport infrastructure. In the short-term, existing energy and raw materials shortages would be exacerbated. More extensive damage to regional airport or port facilities, oil refineries, gas processing plants or pipeline networks would also significantly lengthen the time it would take for production and export activities to return to pre-war levels as repair work could take months, or even years, to complete.
An Iranian attack on the Ras Laffan gas facility in Qatar already destroyed around 17% of the country’s liquefied natural gas export capacity in mid-March, with repair work and a full return to pre-war export levels expected to take between three to five years.
Other critical production and export facilities, such as the pipeline networks Saudi Arabia and the United Arab Emirates have increasingly used to move some of their energy shipments in an attempt to bypass the Strait of Hormuz, could face similar attacks by Iranian forces in the event of an escalation.
Scenario 2: Military strikes continue at current intensity across Middle East
Even if the U.S. and Iran can de-escalate the current cycle of threatening rhetoric and unattainable demands, the security situation in the Middle East is likely to remain in a state of heightened instability until military hostilities cease completely, with economic impacts of the crisis expected to worsen in many parts of the world in the coming weeks.
As one of the world’s most important waterways remains closed for most commercial vessels, raw material and energy shortages are set to intensify across the world, particularly in many Asian countries, where companies rely heavily on imports from the Middle East.
A month into the conflict, a growing number of countries from Asia and Africa to Europe have announced emergency measures to limit the impact of supply shortages caused by the conflict and safeguard existing domestic stockpiles, including in major regional manufacturing hubs such as China and South Korea.
Despite governmental attempts to curb the economic fallout of the crisis, the number of production impacts tracked by Everstream Analytics continues to grow, with dozens of force majeure declarations as well as production adjustments confirmed since the start of the conflict.
While the extent of the impact varies by country and industry, companies in the chemicals, oil and gas, plastics, and automotive sectors are currently among the most impacted. However, if the war continues at its current intensity, the economic impact could soon be felt in other sectors such as electronics or medical device manufacturing, as existing stockpiles of other key raw materials such as helium begin to run dry and prices for energy products and available raw material supply continue to go up.
The regional hostilities could also undo positive developments in the Red Sea, where the last Houthi attack on a merchant vessel was recorded in September 2025. Shipping traffic through the Suez Canal, which links the Red Sea and the Mediterranean Sea, had dropped significantly after the Houthis began targeting commercial vessels in solidarity with Palestinians in Gaza in November 2023. As the security situation began to stabilize last year, some vessels returned to the route through the Suez Canal; however, any trend in increased shipping traffic through the Red Sea could be reversed quickly if the Houthis step into the conflict in full force and begin targeting commercial ships again.
While some reports suggest that the group remains cautious about joining the conflict despite pressure from Iran, the combined economic impact of shipping disruptions in the Strait of Hormuz and the Suez Canal would likely be immense and felt far beyond the Middle East.
Scenario 3: De-escalation and permanent ceasefire between the U.S., Iran and Israel
In contrast, the successful implementation of a ceasefire deal would provide many countries in the Middle East with a welcome reprieve following more than a month of drone and missile strikes across the region.
A cessation of hostilities would allow airspaces in the region to reopen and enable major regional airports, many of which operate at reduced capacity due to security concerns and thousands of flight cancellations, to ramp up operations.
Nevertheless, even if a ceasefire went into effect immediately, a return to pre-war flight levels in and out of the Middle East would likely take weeks, with some disruptions potentially lasting well into the second half of this year after several major airlines suspended flights until the fall. As a result, regional air cargo capacity would likely remain tight in the weeks following a ceasefire, while air cargo rates can be expected to remain elevated until regional flight capacity is restored and fuel costs, driven up by energy-related shipping disruptions in recent weeks, drop again.
A permanent ceasefire is also expected to lead to the reopening of one of the world’s most important shipping routes; however, despite widespread expectations that a peace deal would be contingent on the Strait of Hormuz reopening for all shipping, recent comments made by President Trump suggest that the U.S. might be willing to wind down its military campaign without assurances that shipping traffic through the strait will return to its pre-war status.
The U.S. stepping back from the conflict before the strait reopens would not only delay the normalization of shipping traffic through this critical chokepoint, but it could also open the door to Iran reshaping shipping in the area in its favor. The country’s parliament has reportedly approved a new formal access structure and toll system for ships wanting to transit the Strait of Hormuz, a system that could remain in place beyond the war if the conditions for the waterway’s full reopening are not agreed upon as part of an official peace deal.
While a peace deal may see the Strait of Hormuz reopen, vessel traffic through the crucial waterway is unlikely to return to pre-war levels immediately. Major ocean carriers may require reassurance in the form of additional security measures in the weeks following a ceasefire before they agree to send their vessels through the Strait of Hormuz again.
President Trump had floated the idea of naval escorts through the waterway in the early days of the war, but it remains unclear which countries would be willing to participate in such a security scheme and how escorts would be organized. Not only would insurance premiums remain high amid lingering uncertainty, shipping costs and transit times could remain elevated for months if some ocean carriers decide to reroute vessels along longer and costlier routes such as the Cape of Good Hope in South Africa due to lingering security concerns in the Middle East.
The case of the Red Sea, where shipping traffic dropped significantly after the Houthis started attacking commercial vessels in solidarity with Palestinians in 2023, represents another recent example of how complicated and lengthy the return of pre-conflict shipping levels can turn out to be despite a cessation of hostilities.
If cargo vessels, bulk carriers, and product tankers currently trapped by the conflict begin to move through the strait in larger numbers, such an uptick in shipping traffic would cause disruptions as ports in other parts of the world could see a notable increase in traffic and congestion as ships arrive at their intended destinations with week-long delays.
As a result of these operational roadblocks, it could take months for shipping schedules and port operations to normalize, and for a steady supply of energy products and raw materials to and from the Middle East to resume, even if a peace deal can be agreed on.
Everstream clients are receiving more detailed insights and recommendations about this risk.
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