Following the closing of the Strait of Hormuz, there has been a rapid operational reassessment of logistics operations across Bahrain and throughout the region. Logistics companies are acting quickly to adjust their operations so that trade can continue via longer marine routes and through United States Red Sea ports and increased aeronautical freight. This restructuring shows how heavily dependent on the Strait of Hormuz these logistics companies are. In normal operations, the Strait of Hormuz alone handles approximately 20 percent of the world’s oil supply. Recent reports indicate a significant decline in the amount of cargo that passes through the Strait of Hormuz due to the current conflict.
The Bahrain Centre for Strategic, International, and Energy Studies (Derasat) reported that the recent conflict has affected Bahrain’s supply chain because of limited marine availability to Gulf ports, increased delivery times, and higher transportation expenses for trade activities both in and out of Bahrain. However, the disrupting events have not led to a complete elimination of deliveries to and from Bahrain, primarily because the border between Saudi Arabia and Bahrain has been open and able to facilitate the movement of essential items, and there are strategic reserves of essential goods that can last months rather than just a few days.
The most significantly affected sectors are energy, petrochemicals, plastics, agriculture, manufacturing, and some consumer products that require longer lead times. In the prior month, Bapco Energies and Alba declared force majeure events, illustrating that operational interruptions are now leading to contractual ramifications as well. Food and medicine have remained relatively stable (but yet under stress) through diverse supply sources and stockpiles. Some limited domestic sectors (locally based services, agriculture, fishing, and trade via overland connections) have either remained stable or improved in resiliency during this time.
To sustain their businesses, shipping companies have rerouted their fleets around the Cape of Good Hope. While this rerouting will result in additional transit times of 10 to more than 14 days, alternatives include relocating cargo shipments to the Red Sea ports, using facilities in India and Pakistan, and even utilizing increased airfreight for high-value or time-sensitive cargo due to ongoing restrictions on airspace usage. Saudi Arabian ports (Jeddah and Yanbu) have become important options for transferring cargo between locations, while additional marine infrastructure and logistics initiatives are reducing reliance on disrupted shipping routes through the Gulf region and fostering long-term resiliency. Unfortunately, the alternative routes themselves are not immune to controllable risks, such as increased insurance premiums, congestion (particularly for incoming vessels), geopolitical risks, and the potential for new disruptions in other parts of the region.
