The Strait of Hormuz, the tiny pathway in the gulf which controls the shipment of a third of the world’s crude oil exportation, has become another reference point for how geopolitical issues are directly proportional to supply chain sustainability in the region. On a daily basis, we see how the inability to curb strategic and national security issues causes significant harm to the shipment of goods and services. This is part of the megatrends that will continue to affect the sustainability of the supply chain for the foreseeable future.
Wondering where the Strait of Hormuz is? It lies between the country of Oman and Iran. The Strait is 33km at its narrowest point and it has a two miles long shipping lane in each direction. Almost all the countries in the gulf have been discussing and looking for ways to bypass the strait for years because of its complexities and any escalation among the countries disrupts the movement of goods and services through the gulf. Importation and exportation by sea to any of the gulf countries will have to pass through the strait. That’s how important it is.
Until the nuclear deal is resolved, the seizure of the British tanker will not be the last disruption that will rock the region. Iran has ratcheted up its aggressive stance and caused other countries to respond in kind since May. It seems that none of the conflicting nations are ready to consider the extensive effects these moves have on the nuclear deal.
Although further analysis shows that these incidents are calculated and deliberate about not causing death, they can easily escalate into full-blown conflicts and many analysts believe that these incidents are Iran’s way of responding to the effects of the sanctions on its economy.
The direct impact of these incidents on American citizens is the immediate surge in retail pump price while the indirect impacts of these incidents are not limited to the increase in the price of unleaded gas, diesel, and shipping rates, which affect consumer goods.
I believe that the effect of these incidents is also experienced by other countries as well. I also believe that these irregular or asymmetric warfare tactics used by Iran will not cease until they get a favorable outcome.
Whether or not these tactics will make a major dent on the geopolitical landscape remains to be seen. However, it does not detract from the fact that they are grabbing attention, causing a nuisance and creating a disruption in social dynamics, which affects political and supply chain dynamics within the region and globally.
Iran’s disruption and domination in the strait of Hormuz might just be targeted at crude oil and liquified gas at the moment but it is spreading across different commodities. It is affecting gulf nations’ imports and exports which are worth hundreds of billions of dollars and done with different trading partners globally. These are just some of the effects of populism and its effect on the supply chain of countries affected. Now imagine when the effects spread across different countries over a long period. The effect is and will be devastating.
With the ever-changing dynamics in the region, it is hard to predict what the outcome might be, but the risk of doing business in the region is rising especially if the Seabase supply chain continues to experience these disruptions.