On March 1, U.S. President Donald Trump announced that Ayatollah Ali Khamenei, the Supreme Leader of Iran, was killed in a joint military strike conducted by U.S. and Israeli forces on February 28. State media in Iran later confirmed his death as well.
Prior to the attacks, President Trump had ordered the country’s largest military build-up in the region since the U.S.-led invasion of Iraq in 2003. In the weeks leading up to the military campaign, representatives from the U.S. and Iran held talks to limit Iran’s nuclear program, with a round of technical-level talks scheduled to take place in Austria’s capital Vienna this week. President Trump has since named lack of progress during these talks as one reason for his decision to authorize strikes against targets in Iran.
In retaliation, Iran has since launched military strikes across the Middle East, mainly targeting U.S. allies in the region and countries that are home to U.S. military bases, including Kuwait, Saudi Arabia, Jordan, Qatar, Bahrain, Iraq, Oman, and the United Arab Emirates.
Israel struck targets in southern Lebanon on March 2 after the Lebanon-based armed group Hezbollah launched rockets and drones towards Israel in solidarity with Iran a day earlier, killing or injuring almost 200 people in Lebanon, and potentially widening the conflict further.
After initially seeming open to finding a diplomatic resolution of the crisis, President Trump has since announced that the U.S. would continue its military campaign against Iran until all of its objectives are met. Meanwhile, Ali Larijani, the Secretary of the Supreme National Security Council of Iran, rejected reports that Iran tried to resume talks with the U.S. through mediators and said that his country would not negotiate with the U.S. for the time being.
On a supply chain level, the conflict has already caused severe disruptions to the movement of planes and vessels in and out of the Middle East, and disrupted oil and gas production in parts of the region. With neither side currently willing to return to the negotiation table, those doing business in the Middle East should prepare for further disruptions at major transportation hubs and impacts on regional oil and gas production in the coming weeks.
Military strikes disrupt flights and ocean shipping activities across the Middle East
As the crisis in the Middle East deepens, Iranian officials have reportedly warned vessels not to use the Strait of Hormuz, a crucial waterway located in the south of Iran between the Persian Gulf and the Gulf of Oman.
In response to the deteriorating security situation in the region, several of the world’s major shipping companies have announced immediate changes to their shipping schedules. CMA CGM and A.P. Møller – Mærsk A/S have both suspended passage through the Suez Canal and will reroute vessels around the Cape of Good Hope in South Africa instead.
Similarly, Hapag-Lloyd AG halted all vessel movement through the Strait of Hormuz until further notice from February 28. Mediterranean Shipping Company S.A. (MSC), the world’s largest container shipping company, instructed vessels currently in or on the way to the Gulf region to proceed to designated safe shelter areas until further notice.
Other shipping companies that will move vessels away from the region and reroute to safer areas include Cosco Shipping Co., Ltd., Nippon Yusen KK, Kawasaki Kisen Kaisha Ltd., and Mitsui O.S.K. Lines, Ltd.
The head of the International Maritime Organization (IMO), a United Nations agency responsible for regulating maritime transport, has also asked shipping companies to avoid moving vessels through the affected regions until security conditions improve. Normally, roughly 20% of the world’s oil and gas shipments move through the Strait of Hormuz, including shipments from the region’s biggest oil producers such as Saudia Arabia, the United Arab Emirates, Iraq and Iran.
The conflict has also caused operational disruptions at several seaports in the Middle East. Joint military strikes by the U.S. and Israel have reportedly damaged port facilities and surrounding infrastructure at Chabahar Port, a seaport located in southern Iran that serves as a key hub for trade with Afghanistan and countries in Central Asia.
Terminal operations were halted at the Port of Salalah in Oman and the Port of Jebel Ali in the United Arab Emirates, but DP World was already able to resume activities at Jebel Ali. At the time of writing, at least three vessels, two located off the coast of Oman, and one located near the coast of the United Arab Emirates, were hit and damaged by strikes but it remains unclear if the ships were targeted deliberately.
The military strikes have also caused widespread disruptions to flight and cargo handling operations at many airports in the Middle East. As of March 2, full or partial airspace closures have been announced in Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Qatar, Saudi Arabia, Syria and the United Arab Emirates, resulting in the cancellations of hundreds of flights since the conflict began.
Additionally, impacts on cargo handling operations have been confirmed at major airports in Bahrain, Israel, Jordan, Kuwait, Pakistan, Qatar, Saudi Arabia, and the United Arab Emirates, with handling and delivery operations disrupted as early as February 28 at many of the affected airports.
As a result of the airspace closures and security concerns, a growing number of international airlines have canceled flights to and from the Middle East, including major operators based in the Middle East, Europe, Africa, North America and Asia.
Oil and gas production faces operational and logistics disruptions amid escalating conflict
The military conflict between the U.S., Israel and Iran has not only disrupted shipping activities across the region, oil and gas producers are also increasingly facing operational disruptions at oil and gas fields as well as processing facilities as military strikes continue to spread to neighboring countries not directly involved in the fighting.
QatarEnergy, a state-owned energy company in Qatar, has announced a complete halt to the production of liquefied natural gas (LNG) after Iran attacked important gas production sites in Ras Laffan and Mesaieed but did not disclose the extent of damage and needed repair works yet. Qatar is among the largest natural gas producers and is home to the world’s third largest proven natural gas reserves.
A number of production halts have also been reported in Iraq’s oil and gas industry, where Gulf Keystone Petroleum Limited halted production at its Shaikan oil field in Nineveh, HKN Energy Ltd. halted production at its Atrush Block in Amedi and its Sarsang oil field, and DNO ASA Company stopped operations in the country’s Kurdistan region in response to the deteriorating security situation. Localized production impacts have also been confirmed at oil and gas sites in Israel and Saudi Arabia.
As a result of the production disruptions and expected delivery delays, global oil and gas prices jumped, with natural gas prices reportedly spiking by almost 50%, while the price for brent crude, a global benchmark for oil prices, increased by around 10% to more than $ 82 (€70) on March 2, the highest price since January 2025. While the full impact on the world’s energy supply will only become clear in the coming days, the longer the conflict lasts, the likelier supply shortages and further price increases will become.
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