News – Middle East Conflict
Recent developments in the Middle East have created significant uncertainty and volatility in key commodity and energy pricing and continuity of supply.
NWUPC continue to engage with our supply chain partners, UKUPC Consortia and other relevant bodies to understand the potential impacts of the developments in the Midde East, which is at present very much a developing situation.
You can find some headline information below and updates will be provided as and when it is available. Please note that the information provided is correct at the time of publication. As the situation is volatile please check sources independently before acting on any of the information. In the interim if you have any queries please contact Dave Yates, NWUPC’s Sustainable Relationships Manager.
NWUPC Updates for the Travel Group can be found on the NWUPC Discussion Board here.
NWUPC Updates for the Laboratories Group can be found on the NWUPC Discussion Board here.
- On February 28th, the U.S. initiated Operation Epic Fury with a joint attack on Iran alongside Israel.
- The conflict is likely to impact lead times, supply availability, shipping routes and company revenues.
- Iran controls the Strait of Hormuz, through which approximately 20% of global oil passes.
- The Red Sea / Suez Canal / Bab al-Mandab Strait have been disrupted by Iran backed Houthi forces. Rerouting to the Cape of Good Hope adds approximately 3,000-3,500 nautical miles which equates to 10 to 14 additional days of transit times for goods. India and China face significant supply chain disruptions as major importers through the two major Straits.
- Freight suppliers have deployed Emergency Conflict Surcharges, War Risk Surcharges, and Bunker Adjustment Factors clauses, ranging from $2,000-$4,000 in increased fees per container.
- Air freight for time-sensitive goods will also rise due to reduced capacity, increased demand, and surcharges. Air cargo has been constrained by closed airspace and airports in countries including UAE, Qatar, Bahrain, Kuwait, Iraq, and Iran. While less than 1% of all freight moving globally is by air, the products that do travel by air tend to be perishable or high-value goods like pharmaceuticals, electronics and produce.
- Oil prices felt immediate impact of +8-9%, with gas prices jumping over 10 cents in a day.
- “If it’s a war of attrition, this entire year will be disrupted and volatile… if it’s over in a couple of weeks, we should be back to (transportation) normal in a couple of months.” [Institute for Supply Management].
- Main impact is determined by Gulf supply chain exposure, then secondary effects that will be felt from sporadic delays, and temporary shortages.
TEC, Exceptional Market Update webinar - Oil prices have been extremely volatile and are changing rapidly day to day along with UK Gas prices. You can find current prices here - Commodities - Live Quote Price Trading Data. The National Energy Frameworks continue to provide a strong protection against the current market volatility. TEC (The Energy Consortium) ran an Exceptional Market Update webinar on the 6th of March, providing an update on the markets following the situation in the Middle East. If you would like to watch the recording, or view the slides, then please use this link to do so. You can find the latest updates on the TEC website dashboard. If you require a login contact enquiries@tec.ac.uk.
Helium Surcharge BOC
Given the escalating military situation in the Middle East around the Straits of Hormuz, we have been informed by BOC of a requirement to implement a temporary operational surcharge on Helium with immediate effect from today, March 10th. Attached is a copy of the letter being distributed to end-user customers today which provides further geopolitical context and how the suspension of operations at Qatari oil-refineries is unfortunately affecting the supply of Helium which is a by-product of Liquid Natural Gas production.
I can confirm the surcharge for any quantity of product delivered is £1.03 per m3 (please refer to BOC’s website for surcharges by cylinder size & product type at bocgases.co.uk/charges) and is applicable until further notice. BOC are keen to emphasise that currently there are no plans to enter an allocation event and that there are stocks available, with the surcharge being applied to recover their additional costs incurred from supply chain disruptions, with no additional profit being made.
Please be assured that UKUPC will be working closely with BOC to update the sector with any changes that may occur given this is a constantly moving picture.
- Impact of reduced Iranian output: Hopes that oil and natural gas prices will not skyrocket as, Iran generates around 4% of global oil production and 6% of natural gas, not large enough to substantially move the needle on price. [David Gonzalez, VP analyst at Gartner’s supply chain practice].
- Increased global output: OPEC+ has agreed to a modest increase in oil output for April, because of the disruption.
Emerging geopolitical tensions in the Gulf region are beginning to disrupt critical global technology and industrial supply chains.
- Technology: Just-in-time delivery for microchips and consumer tech is severely disrupted compounded by surging chip demand from AI data centre operators. EV batteries and semiconductors for 2026 production are stranded in the Gulf. Potential risk, if the conflict is protracted, of diversion of semi-conductor capacity to military use.
- Gases: Qatar produces around 40% of the world’s helium, which is used in the production of semiconductors. The region is also a significant producer of ammonia and nitrogen, key ingredients in many synthetic fertilizer products. [Chatham House]
- AV: How soon will the war in Iran hit the AV supply chain? | AV Magazine
Many companies in the services sector will feel little direct impact, although those in the Construction, Finance & Insurance, Mining, Transportation & Warehousing and Wholesale Trade industries will be more impacted [Steve Miller, CPSM, CSCP, Chair of the ISM Services Business Survey Committee]. There are also potential additional security costs in the movement of freight.
- Construction and mining - Materials like cement, concrete, steel and aluminium as well as clay, sand and stone are produced in the Middle East, and production and are subject to increased transport costs. Mandatory service disruptions for some mining activities to guarantee employee safety could lead to tight inventories.
- Other services-related businesses - Key impacts will be felt by those services with exposure to services companies based in the Middle East, like IT and outsourced services providers, and everyone who has a significant energy need.
Article from Maersk: The growing impact of the conflict in the Middle East on global supply chains.
Shipping Lead Times:
- Strait of Hormuz closure: Persian Gulf ports such as Jebel Ali, Khalifa and Dammam are critical in the supply of consumer goods and materials headed for the UAE, Bahrain, Qatar and Kuwait, with shipping lines announcing an embargo on these ports as they are refusing to sail through the Straits. [David Gonzalez, VP analyst at Gartner’s supply chain practice].
Some manufacturers have dependencies on items, like petrochemical byproducts, that are produced out of or shipped through Hormuz and, where they do:
- This can impact on shipment lead times due to routing around Africa, which can add up to two weeks to transit times. [Ashley Hetrick, sourcing and supply chain principal at professional services firm BDO USA]
Note that this is compounded by existing concerns around rerouting due to the conflict in the Suez Canal and Red Sea which had already driven up cost and transit time. The joint military operation has undermined hopes of a large-scale return of container shipping to the Red Sea in 2026. [Peter Sand, chief analyst at Xeneta]
Shipping Costs:
Average spot rates from China have decreased 20-35% since the start of the year, and it is anticipated that, whilst freight rates on major global trades will continue to soften, they will not fall as hard as previously expected. Rates are still up 48% compared to before the Red Sea crisis began in December 2023. [Peter Sand, chief analyst at Xeneta]
