The abrupt outbreak of war in Iran is first and foremost a human catastrophe, but the hostilities have also triggered a secondary crisis within our global supply chains. Some disruptions are immediate; others are deep-seated fractures that will take weeks to fully manifest.
First, traffic in the Strait of Hormuz is at a standstill following military strikes on an Iranian warship off Sri Lanka, reports Reuters. The closure of this vital passage effectively severs a primary artery of the global energy market, as more than 200 ships are at anchor in open waters. Further, Qatar is shutting down its gas liquefaction and won't resume normal production or exports for at least a month. Iraq also cut its oil production in response to the conflict, and Kuwait, Saudi Arabia and the UAE are struggling to adapt.
The Persian Gulf nations supply vast quantities of the world’s crude oil, fuels, natural gas and fertilizer feedstocks, per Bloomberg: “Almost all of the region’s output has to pass through Hormuz, making it a choke point for a fifth of global oil and liquefied natural gas supplies, and half of the global seaborne trade of sulfur.” Traffic has plummeted 95%, and any ships that are managing to pass through have turned off their location-tracking devices to avoid being targeted in a future attack. This widespread disablement or signal jamming has left the Strait in a “digital fog,” Bloomberg continues. (....)