As the war in the Middle East enters its third week, there is no sign of the fighting ending any time soon.
U.S. forces struck parts of Kharg Island, a small island located in the Persian Gulf near the coast of Iran, which handles roughly 90% of the country’s crude oil exports. The strikes on March 13 reportedly targeted military installations and did not damage oil-related infrastructure.
According to several U.S. officials, the U.S. military is relocating a missile defense system from South Korea and moving additional warships and members of the U.S. Marine Corps to the Middle East as reinforcement. The unit led by the Japan-based USS Tripoli includes around 5,000 Marines and sailors spread across several warships.
Following new rounds of airstrikes on Iran and Lebanon over the weekend, Israel has reportedly launched a limited ground offensive against Hezbollah in southern Lebanon on March 16.
Retaliatory strikes by Iranian forces have continued as well, with Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates all intercepting drones and missiles in recent days.
Energy and raw material shortages cause growing number of production disruptions
While Iran has reportedly allowed two Indian tankers transporting liquefied petroleum gas (LPG) to pass through the Strait of Hormuz over the weekend, shipping through the crucial waterway remains effectively halted for the majority of vessels.
Despite this recent exemption, companies across India continue to be among the worst affected by energy supply and raw material shortages caused by the conflict. At the time of writing, Indian companies accounted for around a third of confirmed or expected production impacts tracked by Everstream Analytics so far.
Over the last couple of days, shortages of liquefied petroleum gas have caused business disruptions in industrial areas of Ludhiana, Morbi, Thiruverumbur, Muzaffarpur, Jamshedpur, Firozabad, Hathras, Lucknow, and Varanasi, with hundreds of companies reported to have halted or reduced manufacturing operations. In Maharashtra, the Chamber of Auric Industrial Association has warned that stocks of sulphuric acid, a raw material used in industries such as chemicals, textiles, fertilizer making, and metal processing, could start to run out in the next couple of weeks if shipping through the Strait of Hormuz does not resume.
Throughout last week, a growing number of chemical companies in China have been forced to declare force majeure on contracts, orders and deliveries amid shipment delays from the Middle East, including several subsidiaries of Jiangsu Sanfangxiang Group Co., Ltd., a major polyester producer.
The Malaysia Plastics Manufacturers Association has warned that rising energy and raw material costs are increasingly putting pressure on the country’s plastics industry, with prices for some raw materials reportedly rising by 70% since the conflict broke out.
As the war shows no sign of ending any time soon, the risk of business disruptions is also intensifying outside of Asia and the Middle East. In Germany, Verband der Chemischen Industrie e. V. (VCI), an industry body representing around 2,000 chemical and pharmaceutical companies, warned that these companies are at risk of facing shortages of raw materials such as ammonia, phosphate, helium, and sulfur if shipping through the Strait of Hormuz does not resume soon. Rising energy prices and raw material shortages could put further pressure on a sector that had been struggling economically even before the start of the conflict.
War continues to upend logistics operations in and out of the Middle East and beyond
The effective closure of the Strait of Hormuz hasn’t just disrupted shipping through the waterway itself; it has also impacted shipping routes in other parts of the world.
Ports in India have reportedly seen a notable uptick in shipping traffic after carriers diverted vessels on the way from Asia to the Middle East to Indian ports instead, with an estimated 100,000 TEU worth of cargo said to be affected by the route diversions as of last week. By the middle of last week, 35,962 tonnes and 5,676 tonnes of cargo destined for Iran remain stranded at the Ports of Kandla and Mundra respectively. The stranded cargo bound for Iran at just these two ports is reportedly worth tens of millions of dollars.
Over the weekend, officials in Iran called on residents in the United Arab Emirates to evacuate areas around three of the country’s seaports, including the Port of Jebel Ali, the busiest port in the Middle East. At the time of writing, no attacks have been reported there or at the Khalifa Port in Abu Dhabi, but debris from a destroyed drone caused a fire at the Port of Fujairah, an important oil export hub. Oil loading operations at the port have since resumed, according to reports on March 15.
Drone and missile strikes have also continued to disrupt flights in and out of the Middle East. On March 16, flight traffic at Dubai International Airport (DXB) was briefly suspended following a drone attack that sparked a fire near the airport, the third such incident since the beginning of the conflict. Some airlines such as Qatar Airways, Etihad Airways, and Emirates have resumed a limited flight schedule from their main hubs in Doha, Abu Dhabi and Dubai respectively; however, many airlines have extended flight cancellations until the end of March, including airlines such as Japan-based Japan Airlines, Germany-based Lufthansa Group, Canada-based Air Canada, Netherland-based KML Royal Dutch Airlines, Hong Kong-based Cathay Pacific, and United States-based Delta Air Lines. In total, more than 52,000 flights to and from hubs in the Middle East have been cancelled so far, affecting around six million passengers.
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