InDepth:HowtheIranWarIsStranglingGlobalTrade

The closure of the Strait of Hormuz that has come with the U.S. and Israel’s war on Iran has been catastrophic for global energy markets and international trade.

Both ocean freight and the air freight networks that sustain cross-border e-commerce have been crippled, triggering a forced and painful restructuring of supply lines that experts said could take years to undo.

In normal times, between 100 and 200 vessels transit the strait daily. Since the war began, that figure has plummeted to just 10 ships per day — with long stretches where no vessels pass at all.

According to Lin Guanyu, vice president for the India and Red Sea routes at digital logistics provider YQN Logistics Co. Ltd., approximately 2,000 ships remain trapped inside the Persian Gulf, stranded for more than 40 days. Before the conflict, container volumes from China to the Persian Gulf averaged 80,000 to 100,000 twenty-foot equivalent units (TEUs) a week. Current freight volumes have recovered to only about 10% of normal levels.

The scale of the disruption reflects just how deeply the global economy depends on this corridor. In the first half of 2025, trade between China and the Middle East reached $248.0 billion — a 2.5% year-on-year increase, with Chinese exports to the region surging 10.2% to $144.8 billion, the highest share of China’s total exports in a decade. With the strait now effectively sealed, that trade relationship has been severed almost overnight.

Peak season

The timing could hardly have been worse. Ramadan, which fell between Feb. 18 and March 19 this year, is traditionally the Middle East’s largest consumption and logistics peak. Parcel volumes typically surge 50% compared to normal days, and purchasing power in core markets like Saudi Arabia can double. Local importers had already placed massive orders for food, consumer goods, and production materials in anticipation.

Instead, daily parcel volumes crashed to just 10% of pre-war levels, with overall logistics — air, land, and sea — plunging roughly 70%. Major international express carriers halted operations almost immediately. On March 2, FedEx Corp. announced suspension of pickup and delivery services in Bahrain, Iraq, the U.A.E., Kuwait and Qatar, citing safety concerns and airspace closures. UPS Inc. similarly warned of service interruption risks across the region.

For major Chinese e-commerce brands like Shein, Temu and AliExpress that had made the Middle East a strategic priority, the impact was immediate and severe. Cross-border logistics in the region experienced what one industry insider described simply as a meltdown.

Alternative routes

With Dubai’s Jebel Ali Port — the Persian Gulf’s largest and most efficient facility — entirely inaccessible, shipping lines have scrambled to activate alternative corridors. But the options are severely constrained. Governments have moved quickly: Saudi Arabia authorized overland truck transit from Red Sea ports to Gulf destinations; the U.A.E. opened the ports of Fujairah and Khor Fakkan outside the Strait of Hormuz; Oman promoted its ports of Sohar, Duqm, and Salalah. In nine days leading up to April 12, more than 100 trains moved roughly 459,000 tons of goods through U.A.E. rail links.

In practice, however, these alternatives handle only a fraction of normal demand. Khor Fakkan and Fujairah were traditionally used for dry bulk and roll-on/roll-off cargo, not containers. Their combined processing capacity is less than 10% of normal Hormuz traffic. The result: vessels routinely wait one to two weeks just to dock. Worldwide Logistics Group, one of the largest container providers in the region, normally processed 20,000 containers a month through the Persian Gulf. By March, that figure had fallen to fewer than 200.

The second major alternative — Jeddah Islamic Port on Saudi Arabia’s Red Sea coast — has more capacity, but routing goods there means long-distance overland hauls across the Arabian Peninsula, dramatically increasing cost and transit time. The land corridor connecting alternative ports to the U.A.E.’s Dubai and Abu Dhabi has become a single-artery bottleneck. Even with enough trailers, road congestion prevents swift turnarounds, leaving terminal yards overwhelmed. Port authorities have imposed mandatory three-day cargo clearance deadlines with steep penalties, yet the underlying bottleneck on the roads remains unresolved.

Soaring costs

Freight costs have exploded. Pre-war rates to Dubai averaged around $2,000 per forty-foot equivalent unit (FEU). They have since surged to $6,000 to $7,000 per FEU — a threefold increase. For low-value goods, the freight cost can now equal the value of the cargo itself, effectively pricing many shipments out of viability. Rerouting via Jeddah has pushed costs above $4,000 per FEU for the ocean leg alone, before overland transport fees are added. Ocean container prices have roughly doubled since the war began, and chartered flight rates have surged by 30%.

Air freight has been equally disrupted. Airspace over Kuwait and Bahrain remains closed, and as of mid-April only two airlines were operating cargo services to the region. Direct flight capacity into Israel has been reduced to just three to five flights a week to Tel Aviv — woefully inadequate for a market generating 200,000 to 300,000 daily orders. Rates for air cargo to Saudi Arabia have surged two to threefold; U.A.E. air freight prices have more than doubled. Logistics providers are experimenting with unusual workarounds: one route flies goods from China to Greece, loads them onto a ship for two days to Haifa, then trucks them to Tel Aviv — adding eight days to the delivery cycle while matching previous direct air freight costs.

Uninsurable ships

Beyond cost and delay, a deeper structural failure has emerged: the maritime insurance system has effectively collapsed. Standard insurers are refusing to underwrite voyages to the Persian Gulf. Hull insurance premiums have surged dramatically, and without hull coverage, cargo insurers categorically refuse to provide separate policies. The result is a closed loop of risk aversion that has made the strait commercially impassable even for vessels technically capable of navigating it.

YQN recently attempted to ship 1,500 automobiles to Khor Fakkan. After securing multiple Ro-Ro shipowners, the operation collapsed entirely because no insurer would underwrite it. Shipowners are universally demanding letters of indemnity from cargo owners, who themselves cannot obtain coverage — leaving massive volumes stranded in a Catch-22. Because acts of war constitute force majeure, standard annual maritime policies offer no protection, rendering traditional trade safeguards useless. Protection and Indemnity (P&I) premiums — the coverage shipowners need most — have reached what industry insiders describe as commercially unviable levels.

Traders have been left with stark choices. One Yiwu-based exporter watched a Dubai-bound shipment get diverted to Turkey by the shipowner, who invoked international maritime law allowing unloading at the nearest safe port. Faced with prohibitive transshipment costs, the trader abandoned the cargo entirely. Over the past 45 days, only 30% of containers handled by Worldwide Logistics Group have successfully completed transshipment or local processing. Many have been abandoned because accrued port fees exceeded the value of the goods — a situation expected to trigger a wave of trade disputes in which Chinese exporters will bear the heaviest losses.

Rewiring global trade

Industry leaders are nearly unanimous: even a ceasefire would not quickly restore normal operations. YQN’s Lin estimated that rebuilding the logistics network would take at least one to two months after any agreement, and that regional industrial capacity — particularly in energy infrastructure — could take four to five years to recover to 70% to 80% of pre-war levels. The conflict represents the most severe shock to Middle Eastern trade since the Covid-19 pandemic, compounded by two years of Red Sea disruptions caused by Houthi attacks.

The structural changes already underway are significant. Middle Eastern buyers have pivoted from cost, insurance, and freight terms to delivered duty paid, shifting maximum liability onto Chinese exporters. Companies that can guarantee final delivery — regardless of cost — now hold decisive competitive advantage. Nations are accelerating infrastructure investment in Red Sea and Gulf of Oman facilities, though analysts noted an irony. If the strait eventually reopens, the capital poured into alternative ports will render those facilities economically uncompetitive against direct Hormuz routes.

Longer term, the crisis has elevated the strategic value of overland corridors. The China-Europe Railway Express — particularly its middle corridor through the Caspian Sea and its southern corridor through Iran to the Middle East and Turkey — has emerged as a crucial alternative as maritime routes remain uncertain. Logistics companies are building permanent fallback systems and stress-testing contingency routes that would previously have been considered last resorts.

Contact editor Michael Bellart (michaelbellart@caixin.com)