With the effective closure of the Strait of Hormuz, forgetting has become a difficult task. Since March 5, only hundreds of vessels have passed through the strait, as opposed to the usual thousands. The impact of this disruption is being compared to a global crisis similar to Covid-19 by experts. Gasoline and diesel prices have surged, while jet fuel, fertilizer, and food prices are expected to rise. The crisis may lead to fuel rationing and industrial shutdowns, causing policymakers to debate when a recession may set in. Stagflation is a concern on everyone’s mind.
As companies struggle with the prolonged disruption, they are finding innovative solutions. Some are attempting to transport goods via land routes, such as existing oil pipelines or trucks. Danish logistics group DSV is moving cargo through Saudi Arabia and Turkey to ensure people have access to essential goods.
However, the capacity provided by large container and cargo ships cannot be fully replaced by lorries. Border crossings and challenging terrain further slow down the transit of goods. The battle for control over key routes in the Middle East has heightened, with Trump focusing on the Panama Canal as a strategic asset.
Trump’s accusations against China regarding the Panama Canal have led to increased tensions between the two nations. China, on the other hand, insists on keeping the canal neutral. The cancellation of port contracts and increased inspections of Panamanian-flagged vessels by China have raised concerns about power projection and strategic chokepoints.
Beijing is keen on asserting its influence in key maritime areas, ensuring that incidents like the Panama port issue do not occur again. The cost of such actions may be limited now, but it is unlikely to be tolerated in the future.