Geopolitical Tensions in the Middle East threaten Global Supply Chain


Following the attack on Israel by Hamas on 7 Oct 2023, and the retaliatory bombing on the Gaza strip, there have been several twists and turns, causing heightened instability and geo-political tensions in the Middle East. On 13th April, Iran imitated a retaliatory attack of more than 300 drones and missiles at Israel in response to Israel’s airstrike in Syria which killed many Iranian commanders at the Iran’s embassy. Shortly before this, Iran captured Madeira-flagged vessel MSC Aries in the Red Sea. This incident made Iran’s involvement evident, which was earlier operating via the Houthis and Hezbollah.
The International Chamber of Shipping (ICS) advised ships voyaging through the conflicted region to “conduct a thorough threat assessment and liaise closely with military forces to ensure they are fully protected against further possible aggression by Iranian forces”.
The seizure of this vessel in the Straits of Hormuz has raised concerns on worldwide supply chains. All types of Carriers – bulkers, tankers are reevaluating on deployment of their vessels in the Arabian gulf region. Much terrifying possibility from this crisis could be Dubai being effectively cut-off from global trade along with major ports like Dammam in Saudi, Hamad in Qatar, and Umm Qasr in Iraq.

Ever since the Red Sea crisis began, Dubai has been a key player in releasing pressure for Asia-Europe and Middle East/India-Europe trade, as a regional hub for imports & sea-air corridor. Especially, since Indian exports to Europe was hit hard due to the soaring freight rates, Cape of Good Hope diversions, cutting Dubai off could have bigger reverberation.

However, as per regional sources argue that such developments would not occur, since closure of Hormuz would damage several middle eastern economies including Iran, aside from leading to rocketed global fuel prices. Although, in the immediate future freight rates and insurance costs will escalate due to addition of war-risk premiums.

Meanwhile, the Bangladesh-flagged bulk carrier – MV Abdullah, which was highjacked in March, was released along with its crew on 14th April after a ransom of $5 million was paid. The vessel was highjacked during its transit from Mozambique to the United Arab Emirates.



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