The following is an email we received from a logistics company that we use, and lists some of the effects we can expect to see on shipping from the current conflict in the Middle East.
Hi James I just wanted to provide you with an update with the current situation in the Middle East and the effect it’s having on freight rates. We are already being informed by carriers that they will be increasing freight rates and applying War Risk Surcharges accordingly. At KTL we are working closely with these carriers and will try and mitigate as much as possible these increases, please feel free to contact myself for any spot rates we can secure for you. Hopefully the below explanation will help with understanding the impact war is having on freight. Freight rates are likely to rise due to the war in the Middle East because conflict in this region directly affects some of the world’s most important shipping lanes, energy supplies, and risk conditions for global trade.
Disruption of Key Shipping Routes The Middle East sits at the center of major maritime corridors, especially the Red Sea and the Suez Canal. These routes connect Asia and Europe and carry a significant share of global container traffic, oil, and liquefied natural gas.
If conflict threatens vessel safety in these waters, shipping companies may:
- Reroute ships around the Cape of Good Hope instead of using the Suez Canal.
- Slow down voyages for security coordination.
- Temporarily suspend service to high-risk ports.
- Longer routes increase fuel consumption, transit times, and equipment imbalances — all of which push freight rates higher.
Rising Insurance Costs War zones trigger higher marine insurance premiums. When underwriters classify areas as high-risk (war-risk zones), shipowners must pay significantly more to insure vessels and cargo.
These higher costs are passed directly to shippers in the form of:
- War risk surcharge.
- Emergency operational surcharges
- Higher base freight rates
Reduced Effective Capacity If ships take longer alternative routes, it effectively reduces global shipping capacity. A vessel that would complete five trips in a given period may only complete four. This tightening of available capacity — even without an increase in demand — creates upward pressure on rates.
Energy Price Volatility The Middle East is a major oil-producing region. Escalation can disrupt exports or create fears of supply shortages, pushing up oil prices. Since bunker fuel is one of the largest operating costs for carriers, higher oil prices increase shipping costs globally.
Market Psychology and Risk Pricing Freight markets respond not only to physical disruption but also to uncertainty. Traders and carriers price in risk quickly. Even the perception of escalation can trigger rate hikes as carriers anticipate future constraints.