The Impact of the Israel-Hamas War on Global Logistics and Supply Chain

The conflict between Israel and Hamas is a complex and ongoing issue. It involves a long history of political, religious, and territorial disputes. In early October, Hamas terrorists rained thousands of rockets down on Israel and infiltrated the country by air, sea and land in an unprecedented surprise attack. Thousands of armed Hamas fighters breached a border security fence and indiscriminately gunned down Israeli civilians and soldiers. Other militants stormed beaches in Israel in motorboats and some brought death from the sky, swooping in on paragliders.

The region now stands on the brink of war – with fears of a wider conflict and thousands dead on both sides of the Israel-Gaza border. According to Israeli officials, more than 1,400 people have been killed in Israel, including children, and more than 4,500 people have been injured. On the other side, at least 3,400 people have been killed in Gaza and more than 12,000 have been injured, says the Palestinian Health Authority. As quickly as Hamas’ attack on Israel escalated, the global supply chain was placed under severe threat, affecting crucial sectors such as energy, pharmaceuticals, technology, agriculture, logistics, and commodities. Imminent disruptions in production and transportation demand urgent international cooperation for regional stability and economic security.

The Disruptions

The Israel-Hamas conflict is a long-standing geopolitical issue characterized by periodic flare-ups of violence and tensions. Considering that its proximity to crucial trade routes and energy resources renders the region a strategic importance, any escalation of the conflict can have ripple effects on the global logistics and supply chain industry, including a primary impact in the Middle East.

To start with, the think tank Global Trade Research Initiative (GTRI) has said that the ongoing Israel-Hamas conflict may lead to delays and complications in the India Middle East Europe Economic Corridor (IMEEC) project. Why? Because the conflict could derail the prospect of a historic peace deal between Israel and Saudi Arabia – a crucial linchpin in the IMEEC framework.

The Israel-Hamas conflict has also raised concerns about the International North-South Transport Corridor (INSTC) corridor’s stability. The INSTC is a vital trade route for several locations – a multimodal network of shipping, rail, and road routes that connects India, the Middle East, and Europe. According to reports, the INSTC is a lifeline for many countries in the region, including India, Iran, and Russia, and any disruptions in this corridor can impact trade and logistics in the said nations. Furthermore, this situation highlights the vulnerability of global supply chains to geopolitical events that occur thousands of miles away.

The Israel-Hamas conflict has also prompted the maritime shipping industry to reassess its operations. The maritime trade route through the Suez Canal, which is used for the transportation of goods between Europe and Asia, passes through the Middle East region. Any disturbances in this area can affect shipping schedules and create bottlenecks in the global supply chain. Maritime experts have been closely monitoring the situation. Container xChange’s analysis suggests that the Israel-Palestine conflict has already caused the maritime industry to adjust its routes and schedules to mitigate potential risks.

From an Israeli economic perspective, air cargo volumes have already reduced considerably due to the fact that much capacity has already left the market, mostly belly. Businesses are also under urgent crisis mode and have shuttered operations temporally with employees remaining at home. However, the shipments of humanitarian relief are increasing as a response to the damage and suffering impacted on both sides.

Whilst there is universal hope that the conflict does not spread to avoid further human suffering, even if the airspace around Israel were to close, it wouldn’t really impact global air cargo trade lanes. This is because the area is relatively small, which means that the ability to avoid it wouldn’t add significantly to east-west journey times.

This is an abridged version of the Feature Story published in the November issue of Logistics Insider magazine. To read the complete story, click here.

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