Iran War Strains Supply Chains
- Analysts say the Iran war is now disrupting global supply chains, not just oil markets. - Oxford Economics warned a prolonged conflict could reshape trade flows, lift energy costs, and hit factory orders. - These dynamics are already pressuring Asian manufacturing orders and raising second-order input risks for industrial projects. (oxfordeconomics.com)
The Iran war is now hitting factory supply chains, with analysts warning the shock is spreading beyond oil into trade flows and industrial inputs. (oxfordeconomics.com) Oxford Economics said on April 22 that a prolonged war would create a “severe and sustained” oil-supply shock and leave Asian importers most exposed because they depend heavily on Gulf Cooperation Council energy exports. It said freight effects remain secondary for now, with the bigger hit coming through higher energy costs and disrupted trade patterns. (oxfordeconomics.com) In a separate April 7 scenario, Oxford Economics modeled a six-month closure of the Strait of Hormuz and said global industrial growth would slow to 0.6% in 2026. It identified transport, chemicals, refining, basic metals and power generation as the sectors facing the largest losses. (oxfordeconomics.com) The Strait of Hormuz is the narrow waterway between Iran and Oman that carries a huge share of the world’s energy. The U.S. Energy Information Administration said 20 million barrels a day moved through it in 2024, equal to about 20% of global petroleum liquids consumption, with few practical alternatives if traffic is blocked. (eia.gov) Asia sits closest to that risk. The Energy Information Administration said China, India, Japan and South Korea received 69% of the crude oil and condensate shipped through Hormuz in 2024, and Oxford Economics said direct exposure to Gulf energy leaves Asian importers the most vulnerable. (eia.gov) (oxfordeconomics.com) Oxford Economics said the danger is not limited to crude oil and gas. It said Gulf producers also supply sulphur, helium, polyethylene, raw aluminium, urea and ammonia, which feed into food, metals, plastics and semiconductor supply chains. (oxfordeconomics.com) The strain is already showing up in company orders. Reuters reported on April 23 that supply-chain and fuel disruptions tied to the Middle East war had dealt “a heavy blow” to many Indian factories, even as some cotton-yarn mills in Gujarat picked up export business diverted from other suppliers. (usnews.com) That Reuters report said Fiotex Cotspin’s export order book had grown 40% in recent months and the plant was running at 100% capacity, up from 90% earlier, as Chinese buyers shifted orders. The same report said China depends on imports for about 15% of its raw cotton and about 20% of its yarn demand. (economictimes.indiatimes.com) Oxford Economics said the next stage is a second-round hit: higher inflation, weaker confidence and tighter financial conditions cutting demand for machinery, autos and other big-ticket goods. If the war drags on, the supply-chain damage looks less like a shipping delay and more like a broad industrial slowdown. (oxfordeconomics.com)
