Doctors know that when circulation in the arteries is blocked, there is a risk of having a heart attack. For the first time, several key maritime navigation channels are simultaneously experiencing disruptions, increasing costs, delaying delivery times, and fueling the specter of inflation, when maritime transport accounts for more than 80% of global goods trade.
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First, the Strait of Hormuz. Although Donald Trump has announced nearly a dozen times that it was open to naval transit, it has not yet recovered pre-military attack levels on Iran, when 19% of the world’s liquefied natural gas (LNG), 25% of oil trade, and 30% of fertilizers passed through its waters. From 120 ships daily, it has now dropped to about five on average.
Still in the same area, the Bab el-Mandeb Strait is also suffering after the resumption of Houthi attacks. Its strategic location makes it the main route connecting the Mediterranean with the Indian Ocean, with more than 10% of global trade passing through it. The Suez Canal bears the costs. Ships now opt to pass around the Cape of Good Hope, which adds up to twelve more days of navigation, increasing the bill by more than 30%.
When we talk about war, we must then add to this clinical picture the blockade of grain trade through the Black Sea, following the escalation of the conflict between Ukraine and Russia, through which a quarter of the world’s wheat is transported.
The international price of wheat is at a more than three-year high, after a 45% increase in the last twelve months, and corn prices are also at highs since 2023. For 35 days, not a single grain shipment has been able to leave Ukrainian Black Sea ports, according to Ukrainian sources.
The latest to join this list of trade jams is the Panama Canal. This time due to drought. Starting in September, the allowable draft for ship transit will be reduced to 48 feet, slowing the route between the two oceans. And in Asia, the Malacca Strait, another strategic channel, is overloaded due to typhoons in the area.
Suez, Panama, the Strait of Hormuz, Bab el-Mandeb, Malacca, and even the Rhine suffer disruptions
Not only the seas are strained, but also the rivers. In Europe, heat waves and drought have dried up continental waterways. The Rhine has reached its lowest levels ever recorded and the Danube has fallen to a thirty-year low. And the Rhine is a key route for transporting oil, LNG, diesel, coal, and chemicals through central Europe.
Additionally, ports are congested after decades of low investment. According to the consultancy Drewry, the average waiting time for a ship has doubled since 2019 to a maximum of three days, while seven out of ten ships do not meet their scheduled stops.
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Moreover, insurance premiums have skyrocketed and the environmental cost as well. This explains how the Drewry global container index, which measures freight rates, has doubled since the Iran war.
“The business as usual for freight transport is dead,” stated the logistics firm Golden Freight. “We are not facing a temporary disruption, but a global logistical redistribution due to military operations, rising insurance costs, and regulatory changes that force supply chains to be redesigned.”
Jordi Torrent, secretary general of the Mediterranean Ports Association, acknowledges that there are problems in several global maritime trade channels, especially those associated with Europe and the Mediterranean, which is the main victim of this situation. “But maritime transport tends to restructure relatively quickly, as chains adapt and there is a strong incentive for some exporters and importers to change their sourcing location,” he clarifies.
In this vein, Oriol Montanyà, a UPF professor and logistics expert, recalls that since COVID political discourses are no longer so liberalizing but more protectionist. “Everything related to proximity and zero kilometer gains weight. Many firms have realized that large supply chains once provided much competitive value but lack resilience.”
More distance and more expensive fuel: rising transport costs threaten to fuel inflation
Montanyà rules out shortages but warns that these disruptions “affect logistics costs and companies, which always end up passing them on to the consumer, and therefore inflation rises.” The rise in refined products, such as diesel, is the most visible face of this imbalance, which threatens to spread to other sectors. Is there a doctor in the room?
Jackson Hole
United States, the patroller of the channels
The disorder of maritime routes also raises geopolitical questions. As expert Alex Mills wrote this week in the Atlantic Council, “in 1945, at Bretton Woods, the U.S. offered a deal to the free world: we will protect maritime routes with our navy and let everyone trade in peace; in return, everyone will use our dollar. Whoever controls the ports controls the seas; and whoever controls the seas controls the money (thalassocracy). Now, those maritime routes are blocked simultaneously and there is no ‘global policeman’ reopening them. And the U.S. risks losing its privilege.”
Precisely, today the central bank symposium begins in Jackson Hole, where attention will focus on the financial health of the U.S., with soaring debt, bonds with increasingly high yields, and inflation that does not ease. Federal Reserve (Fed) Chair Kevin Warsh debuts with a highly anticipated speech.
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