Key Takeaways
• The Iran war and closure of the Strait of Hormuz have caused shipping route changes, longer transit times, higher freight and insurance costs, and greater reliance on expensive air freight.
• Suppliers say the sourcing fallout mirrors previous disruptions from the pandemic and attacks on ships in the Suez Canal.
• While the U.S. and Iran have agreed to a temporary ceasefire that reopens the strait, the agreement remains shaky, and uncertainty about the conflict continues to challenge the flow of goods.
Promo companies are becoming increasingly familiar with the disruptive impact of conflicts half a world away.
That’s the case with the war involving Iran. Beyond rising prices for petroleum-based products such as plastic and polyester, and consumer shock from high gas prices, there’s another impact: sourcing disruption.
In response to the attacks on its country, the Iranian government closed the Strait of Hormuz – a major waterway located between Iran to the north and Oman and the United Arab Emirates to the south, and one responsible for routing nearly 25% of the world’s oil supply. The closure is jamming shipping waterways, spiking transportation prices, reducing capacity and delaying deliveries and final production of overseas goods.
Even with a temporary ceasefire intended to reopen the strait – which Iran later reversed following additional attacks – ongoing uncertainty is pressuring suppliers.
“This is going to have a great impact on the global economy, crippling shipments moving around the world,” says Eric Rubin, CEO of Counselor Top 40 supplier Blue Generation (asi/40653). “Shipping routes will have to dramatically change, resulting in longer transit time, and a short supply of containers since vessels will get stuck in transit.”
“This is going to have a great impact on the global economy, crippling shipments moving around the world.”
Eric Rubin, Blue Generation (asi/40653)
Closing & Reopening the Strait of Hormuz
Over the last week, President Trump repeatedly called for a ceasefire with Iran to reopen the Strait of Hormuz, with a Tuesday night 8 p.m. ET deadline. Iran initially didn’t budge but agreed to a two-week ceasefire with the U.S. just before the deadline.
After the agreement, Iran’s Foreign Minister Abbas Araghchi said that ships would be permitted to pass through the Strait of Hormuz over the next two weeks temporarily “via coordination with Iran’s armed forces and with due consideration of technical limitations.” However, within hours of the agreement, Iran closed the strait again after Israel attacked Lebanon, an act Iran says put the U.S. in violation of the ceasefire. The White House denied reports that the strait was closed again. “We have seen an uptick in traffic in the strait today,” White House Press Secretary Karoline Leavitt said.
Prior to the war, 130 ships per day passed through the waterway safely. By comparison, only 120 ships have completed that same passage since the war began, Jennifer Parker, a former naval officer now at the University of Western Australia’s Defense and Security Institute, told The New York Times. Now, with another closure and a backlog of ships trying to pass through a region that is still susceptible to increased security threats and military activity, traffic flowing through the strait is unlikely to return to pre-war numbers – at least not yet.
The promo industry is no stranger to shipping delays and costly reroutes driven by geopolitical conflict. Just look back to 2023 – and about 1,500 miles west of the Strait of Hormuz – when Yemen’s Houthi forces (reportedly acting in solidarity with Palestinians during the war in Gaza) began attacking commercial vessels transiting the Suez Canal. This 193-kilometer waterway linking the Red Sea and the Mediterranean handles roughly 12%-15% of global trade and about 30% of container traffic, according to the Atlantic Council. As security risks escalated and disruptions stretched on for nearly two years, most vessels were diverted to longer, more expensive routes around Africa.
Read this full feature, complete with in-depth analysis, on Counselor.
