For centuries before and after the discovery of oil in the region, the Middle East has occupied a central position in the global economy. First as a hub for international trade, including multiple spice routes and the famous Silk Road, and of course as a large-scale oil-producing region beginning after World War II.
Unfortunately the Middle East has also long been a hotbed of geopolitical conflict and instability, and in 2026, the escalating tension between Iran and regional/global powers has triggered one of the most significant disruptions to global supply chains in decades. The consequences are far-reaching and potentially long-lasting, impacting everything from energy markets and shipping routes to manufacturing costs and consumer prices worldwide. All of these factors can have multiple negative impacts on supply chains.
The Middle East’s importance in the modern world stems largely from its geography and energy resources. The Strait of Hormuz, a now-famous, narrow maritime chokepoint, is one of the most critical arteries of global trade. Roughly 20% of the world’s oil and a significant share of liquefied natural gas (LNG) pass through this route. President Trump has specified that Iran open this key waterway on pain of additional strikes against the country’s power grid, and on March 26 the Trump administration extended that deadline for the second time, allowing for 10 more days before targeted attacks. Regardless, it’s a mess.
As of March 2026, the world is experiencing the largest-ever disruption to global energy supplies, according to a March 19 Reuters report. The flow of crude and condensate have dropped by about 12 million barrels per day, or around 12% of daily world demand due to infrastructure damage, shipping disruptions, and reduced production. These reductions are worsened by output cuts and export halts by some Gulf producers. While the Middle East is not the only source of the world’s oil, it does produce about 30%-32% of the global oil supply, which is more than Africa, Central/South America, Europe, and the Asia-Pacific region combined. The lower supply of oil from the Middle East is not easily replaced.
Naturally, in any supply chain, when the available supply of anything is reduced, related prices tend to rise unless other alternative sources are available. The US produces roughly a third of the world’s oil, but with production already near its max, we can’t simply dial up more oil without dipping into strategic reserves, which comes with its own set of problems.
Oil is the backbone of global supply chains, and rising oil prices affect nearly every stage of production and distribution. As we have seen too many times before, the most immediate and impactful consequence of nearly any Middle East conflict is a rapid and often lengthy rise in oil prices. Just as financial and stock markets respond negatively to volatility, energy markets react quickly to geopolitical instability or any threat to the oil supply in the Middle East. The turmoil of recent weeks has been no exception.
Recent reports confirm that oil prices have surged sharply amid fears of supply disruption. Brent crude (North Sea sourced crude) has topped $107 per barrel, with some projections suggesting prices could climb even higher if the conflict persists. Brent futures hit $119-$120 a barrel in March 2026. This is lower than the all-time high price of $147 per barrel in 2008, but adjusted for inflation, this is a historical high ($107 in 2008 calculates to about $162 today, and $120 in 2008 equals $182 in today’s money). Let’s go over what this could mean as far as impacts to global supply chains.
These current disruptions highlight some fundamental vulnerabilities remaining in global supply chains. First, these supply chains do still run on oil. Modern global supply chains rely heavily on transportation, and ships, trucks, planes, and trains all primarily depend on fossil fuel. According to a Stanford report, 90% of global transportation is still fueled by oil, and transportation accounts for nearly two-thirds of worldwide oil consumption. When oil prices rise, transportation costs increase immediately.
To make matters worse, the flow of oil depends on the reliability of a small number of critical transit points. When those ports, straits, and canals are threatened, blocked, or shut down, shipping companies respond by adding fuel surcharges to try to soften the financial blow (to the shipping companies) of these spikes in fuel prices. This instantly raises the cost of moving goods across oceans and continents, and these increased costs are almost always passed on to the end consumer.
During the current conflict, not just the Strait of Hormuz and the Red Sea have been threatened. Port operations have also been affected. Major logistics hubs such as Dubai’s Jebel Ali port temporarily suspended operations following attacks. In cases like this, shipping routes have to be rerouted to avoid high-risk areas. This can add weeks to delivery times and significantly increases fuel consumption.
Additionally, when a primary thoroughfare is slowed or closed, this can (and often does) result in a supply chain bottleneck, where there’s increased congestion at alternative ports and resulting reduced shipping capacity, which compounds the problems of increased transit times and fuel consumption further, worsening cost pressures. In many cases, insurers also impose higher premiums for vessels operating in conflict zones, further driving up logistics-related prices.
These factors combine to slow the movement of goods globally, affecting industries from electronics to food.
The New York Post reported on March 26, 2025 that US inflation will soar to 4.2% if the Iran war drags on. Citing the latest forecast by the Paris-based Organization for Economic Co-operation and Development, the report states, “The breadth and duration of the conflict are very uncertain, but a prolonged period of higher energy prices will add markedly to business costs and raise consumer price inflation, with adverse consequences for growth.”
The Guardian reported, “The boss of Next has said clothing prices could rise by 4% to 10% if conflict in the Middle East extends into the autumn and factories are hit by higher fuel and fabric costs.” The story also says that “container ships are being delayed by up to two weeks as they travel slowly to save fuel.” Shipping delays can have trickle-down impacts on pricing, as well as inventory/warehousing disruptions all along the supply chain.
Furthermore, even if we focused on one consumer goods category and examined the impact of inflation on that isolated area, the actual impacts of inflation in reality are far more widespread and interconnected. When one type of product becomes more expensive but salaries and discretionary spending remain static, people either have to choose not to purchase the more expensive goods, or reduce their spending in other areas to compensate. Less available spending money means less discretionary spending on entertainment, dining out, vacations, car upgrades, newer phones or other electronics, and pretty much everything else.
A March 11 PBS report echoed this sentiment: Mark Mathews, chief economist and executive director of research at the National Retail Federation, said higher gas prices will likely affect consumer spending, particularly among lower-income shoppers. He said US households pay on average $2,500 a year, or nearly $50 a week, to fill up their tank. If consumers are paying $10 more per week, their budgets are certainly affected. “How do they offset that? Going out to a movie theater or going to a theme park or going out to eat — all those areas would be ... more likely to see cuts.”
You can easily see how an increase in prices for one category of goods can soon snowball and create financial tension across multiple industries and supply chains.
It may seem strange that high oil prices can result in us all paying more for our food, but the PBS report elaborated that if the price of oil remains high enough for longer than a month, groceries could get even more expensive than they already are. David Ortega, professor of food economics and policy at Michigan State University, said, “Higher oil prices impact the agricultural sector in two ways. They raise the cost of inputs such as fuel for farm equipment and the fertilizer, which is derived from natural gas. They also raise demand for soybean oil, palm oil and other vegetable oils that can be used as replacements for petroleum-based fuel.”
However, Ortega pointed out that on-farm costs are only a small part of what consumers pay at the supermarket. A larger share comes from the cost of processing and transporting food, which uses a lot of energy. “Food still gets to the grocery store on diesel, whether it’s on a truck or on a boat,” Ortega said, adding that if oil prices remain elevated, fresh foods that must be transported quickly could see price hikes more quickly than packaged foods, which are less perishable. This can also impact food and beverage supply chains, as overstocks or stockouts can occur due to bottlenecks or delays.
Oil and natural gas are essential for manufacturing. They are used not only as energy sources but also as raw materials in industries involved in making and using chemicals, plastics, and fertilizers. As oil prices rise, so do the costs of these components. This has a cascading effect across industries. Petrochemicals become more expensive. Plastic production costs rise and components get more expensive to compensate. Fertilizer prices increase, impacting agriculture and eventually the price of food, as we mentioned above. This year, disruptions in the Middle East have already affected fertilizer supplies, which rely heavily on natural gas.
Industries that depend on stable energy supplies—such as chemicals, metals, and construction—are particularly vulnerable. Rising costs and supply uncertainty can lead to reduced production and investment. Higher raw materials costs naturally lead to higher production costs, which are then passed on to consumers, which results in lower sales, worsening the financial situation of anyone connected to the supply chain.
Global supply chains have increasingly been transitioning to “just-in-time” (JIT) inventory systems, which minimize storage costs by ensuring goods arrive exactly when needed. While efficient in ideal conditions, these systems are highly vulnerable to supply chain disruptions.
When conflict or other volatility delays shipments or increases costs unpredictably, companies are forced to rethink their logistics and inventory management strategies. Some firms begin stockpiling inventory, while others struggle with shortages. Delays, stockouts, bottlenecks, and other inventory management issues have trickle-down effects on companies adjacent to the supply chain as well as on consumers, who may have to suffer not only increased prices but delays in shipments or the inability to purchase certain items for a significant portion of time. This further damages retailers’ reputations and customer retention efforts, even though it may not be the fault of the retailers in this particular case.
Pretty much every industry is depending on oil on some level, but certain industries are particularly sensitive to energy price fluctuations. Automotive manufacturing, aviation, shipping and logistics, and heavy industry are just a few examples.
In the automotive sector, rising oil prices have already increased logistics costs, affecting the transport of vehicles and components.
Air travel has also been disrupted, with higher jet fuel prices leading to increased ticket costs and reduced flight availability. (Naturally this has also been exacerbated by the recent troubles in TSA funding.) Higher jet fuel prices also impact air cargo firms, which are a vital component of global supply chains.
Energy-importing countries (those dependent primarily on outside sources for energy supplies such as oil and natural gas) may potentially see significantly higher inflation as well, resulting from higher prices and shortages. Asia is particularly exposed due to its reliance on Middle Eastern energy. A large proportion of oil passing through the Strait of Hormuz is destined for Asian markets, Business Insider reports. In fact, in 2024 around 84% of all crude oil that passed through the Strait went to Asia.
The story quotes Mohamed El-Erian, a top economist: “The next tipping point is when actual supplies, actual quantity, do not get to the countries in Asia, in particular. If that happens — and I suspect we are within a couple weeks of that — if that happens, then you're going to see an enormous economic impact because it’s not just about the price, but it's also about the quantity available.” Disruptions in supply can therefore have severe consequences for manufacturing hubs such as China, India, and Japan. Countries that rely heavily on LNG imports, such as India and Pakistan, face increased energy costs and potential shortages, further stressing global supply chains.
The current crisis is likely to have lasting effects, and one of them that could be viewed as a positive is it may force reluctant companies and governments to improve their supply chain management approaches. Some options include:
One way organizations can improve their response to supply chain disruptions is by diversifying their sourcing and production assets so they are not reliant upon one or two volatile areas or vulnerable supply chains. They may seek to put alternate relationships in place and maintain partial capacity from these new sources, so that if and when a primary source is cut off or restricted in the future, the new supply chains can be spooled up more quickly to take up the slack.
Some firms may wish to move production closer to home to reduce exposure to global disruptions. This can have the additional benefit of creating domestic jobs and supporting local supply chains, which has multiple upsides if profitability can be maintained.
This is a valid plan for any organization depending on volatile supply chains, but it shouldn’t just be the default, knee-jerk reaction whenever there are disruptions. Informed, data-supported inventory buffers can help alleviate cost swings and supply shortages, reducing delays, softening price hikes, maintaining product delivery schedules, and improving customer relations. However, this must also be paired with intelligent, S&OP platforms and strategies to help develop flexibility in planning and other stages in the supply chain.
Some industries may also be reconsidering their reliance on ultra-lean, just-in-time supply chain models.
This is often the headline story for “green” news organizations and reporters whenever there’s trouble in the Middle East or the global oil supply is threatened, which is increasingly common. However, it certainly has merit. Rising oil prices certainly accelerate people’s (and businesses’) motivations to transition to more renewable energy sources, reducing their dependence on fossil fuels and the associated geopolitical hotspots. However, though feel-good news stories might convince some people otherwise, history shows that the global use of oil has really not changed significantly over the past 40 years. In fact, global fossil fuel consumption has risen significantly, roughly doubling since 1980 and increasing by approximately 62% between 1995 and 2023. So it’s important to keep things in perspective. It’s definitely a good idea to look at alternative, greener energy sources, but also stay educated about all the pros and cons.
From transportation and manufacturing to food and energy, the effects of this most recent trouble in the Middle East are interconnected and far-reaching. Shipping bottlenecks, rising costs, and inflation all contribute to a more fragile and volatile global economy, and ultimately, the current crisis underscores the need for more resilient supply chains—ones that can withstand geopolitical shocks and adapt to an increasingly uncertain world.
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