Donald Trump’s declaration that the Strait of Hormuz will reopen as part of a US-Iran peace framework has been welcomed by global markets, with oil prices falling in response.
Yet while the agreement could ease pressure on international trade routes, supply chain experts caution that lingering disruption, freight inflation and operational backlogs mean businesses should view the development as a step towards recovery rather than a return to business as usual.
With the US and Iran agreeing a framework for a deal to end the war and reopen the Strait of Hormuz, Tammy Kulesa, Senior Director, Supply Chain Execution at Blue Yonder, writes that backlogs, high freight costs, and refinery disruptions mean a return to normal operations will be slow and uneven.
Easing Supply Chain Pressure
The re-opening of the Strait of Hormuz eases supply chain pressure but doesn’t cure it. The Strait of Hormuz re-opening restores vital oil and goods flows and eases supply chain shortages, but backlogs, high freight costs, and refinery disruptions mean a return to normal operations will be slow and uneven.
Shippers, manufacturers and consumers can expect some relief, but our expectation should be that it is gradual and irregular. While crude oil may stabilise and input costs could ease over the next couple of quarters, elevated freight rates, persistent risk premiums and refinery disruptions will keep transport and product prices above pre-crisis levels for months. Consumers should be prepared for slow relief as inflationary pressures continue to ripple through supply chains.
A Window of Opportunity
Companies need to treat this as a window, not a resolution. Uncertainty persists, possibilities for renewed disruption linger and risk models now account for future disruptions. Companies will prioritise the movement of critical shipments and need to actively manage transportation risks by diversifying routing and modal options to preserve service commitments.
Maintaining Stability in Volatile Global Conditions
Looking forward, companies will need to maintain focus on resilience in the supply chain with a shift from cost-optimisation to resilience optimization by increasing real-time visibility and control tower approaches to sense disruption before it hits. Scenario planning, real-time monitoring and readiness for renewed disruption are essential for maintaining operational stability amid volatile global conditions.
