The Iran War Is Throwing Global Shipping Into Chaos
After years of chaos in the global supply chain, Ryan Petersen, CEO of logistics company Flexport, estimated that 2026 could offer a modicum of order. The pandemic was now behind us. The Red Sea shipping channels, closed due to the Gaza crisis, were finally open. The Supreme Court overturned many tariffs imposed by Donald Trump, and some Flexport customers were hoping for refunds. Petersen was finally able to focus on what he had identified as the company’s major effort of the year: adopting the latest AI technologies to make Flexport more efficient.
Then the United States and Israel went to war with Iran. Chaos is back, and it will cost us dearly.
I spoke with Petersen this week to get a sense of how serious the situation is in the global supply chain and what it means for Flexport’s business.
While the war in Iran will wreak havoc on Flexport’s customers, it is also an opportunity for the company to prove its worth. After all, its business relies on moving and tracking goods using cloud technology, improvising where necessary to get goods to their destination. These skills are needed when the Strait of Hormuz is perilous – several ships were attacked there this week – and major Middle East ports come under fire.
Port countries like Kuwait, Qatar and the United Arab Emirates are central hubs for goods in transit. A major shipping company told Petersen it would not load containers on ships transiting some of the Middle East’s major ports. If a voyage is underway, the container must be dropped off at the next port of call. “Now, as an importer or company that ships goods, you suddenly have a container in France or Tangier, and it’s up to you to figure out what to do about it,” Petersen says. Doing nothing means the cargo incurs higher and higher storage costs. All of these costs are ultimately passed on to consumers.
Petersen tells me that only recently have major shipping companies resumed transporting goods through the Red Sea, considered dangerous due to Houthi attacks. Today this has stopped because of the war. The alternative route was a long detour around Africa. “This raises prices a little, because a trip costs more, but, more importantly, it reduces supply: ships make fewer trips per year,” says Petersen. “There were high hopes that returning via the Red Sea would increase market capacity and reduce prices, but now this is no longer relevant.”
Petersen visualizes the situation for me by launching a product called Atlas, which tracks the movement of container ships in real time. Coincidentally, Flexport launched Atlas two days before the war began. Petersen cautioned me that not all locations are accurate, as many companies have turned off their ships’ transponders or even used high-tech methods to spoof their locations to avoid attacks. Yet it is clear that trafficking in the Middle East is moribund. Petersen hovers his cursor over a group of ships gathered around the UAE port of Jebel Ali, located near the Strait of Hormuz. It looks like the traffic jam at the beginning of The The Earth. “These ships are stagnating in this area,” he said. “You wouldn’t normally see this many grouped together here. »
It’s not the worst, he adds. Flexport is not heavily involved in the oil trade, but Petersen believes energy shortages will have a bigger negative impact than the contents of containers stuck in Tangier. “The United States is self-sufficient, but globally there isn’t enough oil to go around – you’re going to have shortages, and then you’re going to see a crazy parabolic price rise. »
