Impact of the Israel-Palestine Conflict on Global Supply Chain
|

Impact of the Israel-Palestine Conflict on Global Supply Chain

ByAhtasham

The Israel-Palestine conflict has raised significant alarm about the possibility of disruptions in the global supply chain. This ongoing dispute has triggered concerns over potential bottlenecks in shipping, surging freight rates, and unpredictable delivery schedules, all of which present a substantial hurdle to the smooth operation of worldwide supply networks. Additionally, the lack of clarity surrounding trade routes and supply chains in the affected region may result in delays, consequently driving up the expenses associated with trade in this critical area. Before we delve into understanding the effects, let’s first explore the current updates on major ports and airports in the region.

Here are the major current updates on the ports in the region

Ashdod Port (Israel): Ashdod Port is currently operational but in an emergency mode, allowing only vessels carrying hazardous materials with strict implementation. The Israeli Navy is maintaining a significant presence in the vicinity and controlling the approaches.

Ashkelon Port (Israel): Ashkelon port is closed, but there may be exceptions for specific cases regarding cargo berthing or discharge at the anchorage.

Haifa Port (Israel): Although Haifa Port remains open and operational, there have been some delays and cancellations. Shippers are advised to verify the status of their shipments with their respective shipping companies before sending or receiving cargo at the port.

Ben Gurion Airport (Israel): Ben Gurion Airport continues to operate, but there have been delays and cancellations in light of the ongoing conflict.

Damietta Port (Egypt): Damietta Port in Egypt remains unaffected by the Israel-Hamas conflict, situated over 600 kilometers from the Israeli border. Operations at the port remain undisrupted.

Port Said Port (Egypt): The Egyptian government has taken measures to enhance the safety and security of Port Said, including increased security checks and patrols.

Queen Alia International Airport (QAIA) in Amman, Jordan: QAIA is not directly impacted by the Israel-Hamas conflict, located approximately 100 kilometers from the Israeli border. However, there are indirect consequences such as a reduction in tourism to Jordan due to the conflict.

Beirut–Rafic Hariri International Airport (Lebanon): There is no current war between Israel and Lebanon, and Beirut’s airport (BEY) has not been directly affected by recent Israeli airstrikes. However, the Israel-Palestine conflict indirectly impacts BEY, causing a decline in tourist arrivals to Lebanon.

Damascus International Airport (Syria): Damascus International Airport has been targeted by Israeli forces and Syrian rebels, leading to several closures.

3 major repercussions within the supply chain due to Israel-Palestine conflict

Container Shipping: The ongoing conflict in Israel, if it were to extend beyond its national borders, presents potential dangers to two critical maritime choke points: the Suez Canal, a vital waterway for various commercial vessels, including container ships, and the Strait of Hormuz, which plays a pivotal role in oil and gas shipping. The Suez Canal stands as an example of an “open choke point,” which means that ships have the option to circumnavigate it. 

In the event of the canal’s closure due to regional conflicts (as previously observed during conflicts involving Israel in 1956 and from 1967 to 1975), vessels would need to take the longer route around the African continent, leading to a reduction in available vessel capacity. This reduction could act as a positive catalyst for shipping rates. However, it’s worth noting that Israel itself represents a relatively small market in terms of container shipping. The primary ports of Ashdod and Haifa in Israel collectively handle only 0.4% of global container throughput. 

Export-Imports: The ongoing conflict is poised to have sector-specific repercussions, notably in industries like iron, steel, fertilizers, and organic chemicals. Countries with robust trade links to Israel, such as India, are teetering on the edge of potential difficulties. This evolving scenario underscores a broader concern for global enterprises reliant on materials sourced from, or transiting through, the affected region. Prominent figures in these industries stress the urgency of a peaceful resolution, crucial not only for immediate regional stability but also for the overarching equilibrium of the global economy.

Petroleum & Oil: The rise in petroleum prices, often exacerbated by Middle East conflicts like the recent Israel-Palestine skirmish, adds another layer of complexity to global supply chains. As a critical component in freight operations, pricier petroleum leads to higher operational costs for carriers, which inevitably translate to increased costs for consumers and potential transportation delays. This petroleum crisis not only impacts the economic stability of nations but also highlights the intricate interplay between geopolitics and the intricate web of global trade and logistics, underscoring the vulnerability of supply chains to external shocks and conflicts in key oil-producing regions.

3 significant consequences of Israel- Palestine conflict

  • Disruption of Transport and Logistics: The conflict can lead to immediate disruptions in transportation and logistics, causing delays, damage to infrastructure, and increased operational costs. Ports in the region may become inaccessible or pose security risks, impacting the smooth flow of goods and materials through the supply chain.
  • Increased Costs: Businesses often need to implement additional security measures during periods of conflict, leading to higher operational expenses. Companies may also incur costs related to rerouting shipments, finding alternative transportation routes, or identifying substitute suppliers, all of which can significantly increase the overall cost of the supply chain.
  • Geopolitical Uncertainty: The Israel-Palestine conflict introduces geopolitical uncertainty into supply chain management. Companies must carefully assess the risks associated with operating in the region, which can deter investments and lead to hesitant decision-making in supply chain strategies. This uncertainty can affect long-term planning and investment in the area.

Key recommendations for ensuring smooth deliveries in Israel-Palestine conflict

We recommend supply chain professionals to stay informed in these uncertain times by reaching out to trusted local sources for the latest and most dependable security updates. It’s essential to assess port calls on a daily basis. Make the most of real-time container tracking to receive real-time updates for vital shipments with scheduled port calls in and around Israel’s ports. Ensure your holiday season deliveries remain unaffected by geopolitical tensions. Robust scenario planning and forming partnerships with reliable stakeholders can also enhance resilience and agility in operations. These strategic measures will ensure a smoother flow of goods across borders, fortifying the global trade ecosystem against future adversities.