The shipping market has been disrupted again. The Middle East, one of the world's three major powder kegs, has been doused with gasoline. As geopolitical tensions in Iran escalate sharply, the Strait of Hormuz—the chokepoint often called the lifeline of global energy—has experienced a severe geopolitical event. What follows is a global shipping tsunami more violent than the container shortage triggered by the pandemic in 2021 and more desperate than the Red Sea crisis of late 2023. Recently, shipping lines have been adding various surcharges. According to a Reuters report on March 1, Hapag-Lloyd has imposed war risk surcharges on Gulf-related cargo, and CMA CGM has also imposed emergency conflict surcharges on ports in multiple Middle East countries and the Red Sea. On March 19, Reuters also reported that CMA CGM, due to soaring fuel costs, has imposed emergency bunker surcharges on land transport as well, beyond sea freight. Meanwhile, according to our frontline research, US-bound routes have also started to see further rate increases recently. Many people wake up to find that quotes they could negotiate yesterday need to be re-signed today, with noticeably more surcharge items and significantly shorter validity periods for spot market quotes. For some popular sailings and tight space, the problem is not just that prices are higher, but that even if you are willing to pay more, you may not secure the ideal space and schedule. To put it bluntly, the Middle East conflict is making global freight rates pay the price. Another black swan appears To understand why freight rates are surging, we first need to grasp what the Strait of Hormuz really is. Many people have a vague geographic concept of the Middle East, often confusing the Red Sea crisis (Bab el-Mandeb) with the Strait of Hormuz. That is a cognitive error. If the Bab el-Mandeb chokepoint affects containers on Asia-Europe routes, then the Strait of Hormuz chokepoint affects the lifeblood of the global economy—oil. The Strait of Hormuz lies between Oman and Iran, connecting the Persian Gulf and the Arabian Sea. More than 20% of global oil consumption and nearly one-third of seaborne oil trade pass through this waterway, which is only 39 kilometers wide at its narrowest point. The direct outbreak of geopolitical conflict in Iran has caused the risk index in this area to skyrocket exponentially. Regardless of whether the event ends in localized skirmishes or a full blockade, for the extremely risk-averse global shipping industry, the expectation alone is enough to be lethal. After the event, the shipping market reacted extremely quickly:
- What does rising crude oil prices mean? It means shipping lines' bunker costs rise. Bunker costs account for 20% to 30% or even more of total ocean shipping costs. Shipping lines will pass on this cost in full through bunker adjustment factors (BAF) to every exporter.
- With the Red Sea risk unresolved, problems in Hormuz further increase the risk premium on Middle East-related routes. For Asia-Europe liner services, the diversion via the Cape of Good Hope is more likely to be extended and solidified. For Persian Gulf energy transport, the key is not simply rerouting, but whether outbound safety, insurance availability, and alternative pipeline capacity are sufficient.
- Even if shipowners are willing to take the risk, insurance costs will rise sharply. Moreover, some underwriters may tighten coverage, raise rates, or impose restrictive conditions, significantly raising the barrier to transit. Rising Hormuz risk first hits energy prices and energy transport insurance, while persistent Red Sea risk continues to lock in diversions for Asia-Europe containers. The combination pushes up global shipping costs, bunker surcharges, insurance surcharges, and supply chain uncertainty together.
Middle East conflict: even US West Coast routes pay the price?
Many sellers on US routes (China-North America) may ask: "Wait, the Middle East conflict—what does it have to do with my shipments to Los Angeles (LA) and Long Beach (LB)? Why are US West Coast rates also rising?" To answer this, we need to understand how global shipping operates. Shipping is an extremely standardized global circulation system. In this system, capacity flows like water. Let's briefly walk through how this event creates a capacity gap: 1. Diversion via the Cape of Good Hope consumes global capacity. Due to the overall deterioration in the Middle East, almost all container ships on Asia-Europe routes must divert around the Cape of Good Hope. This adds 10 to 14 days per one-way voyage, and nearly a month for a round trip. Suppose a route originally required 10 ships to maintain a weekly frequency. Now, because the voyage is longer, 13 to 14 ships are needed to maintain the same frequency. Where do the extra 3-4 ships come from? They must be pulled from other routes (e.g., US routes, Latin America routes, Africa routes). 2. Shortage of both ships and containers. A longer voyage means not just more ships occupied. Ships spend more time at sea, and so do containers. Containers return to Chinese ports—such as Shanghai, Ningbo, Shenzhen—later, which reduces the turnover efficiency of available equipment for exports. This may not immediately evolve into a comprehensive, systemic shortage crisis like in 2021, but it will significantly increase the probability of tightness at specific times, specific ports, and specific container types. In essence, the return speed of containers slows down. For a system highly dependent on export rhythm and booking efficiency, once turnover slows, prices start to rise. 3. What truly drives US route rate increases is not just costs, but also shipping lines' price management. Shipping is never a completely passive industry. In a downward rate cycle, shipping lines are best at using blank sailings, capacity control, surcharges, and space management to push prices back up. After rates fell from highs in the past two years, shipping lines have been trying every means to stabilize prices. The escalation of geopolitical conflict gives them a perfect excuse to support prices.
Impact on sellers by category
Different categories face vastly different fates in this storm. We categorize export sellers by cargo value and volume.
1. Large/bulky goods sellers: the first to suffer
If you sell outdoor furniture, building materials, large auto parts, or products that are bulky but low in value (e.g., plastic storage bins, cheap plush toys), this surge in freight rates could be devastating. The profit model for large items relies heavily on low ocean freight costs. For large, low-value goods, even a moderate rise in freight rates from low levels can quickly erode profits, because logistics costs already account for a high proportion of total costs, and the logistics cost per unit may multiply. If you raise prices, consumers won't buy, and rankings plummet; if you don't, you lose money on every sale, essentially working for the shipping lines. Many large-item sellers now face a choice: abandon shipments or clear inventory at a loss?
2. Sellers with low-to-mid unit prices, high turnover, and strong time sensitivity
Sellers of apparel and footwear may not have large unit volumes, but their unit prices are not high, and profit margins are extremely thin. Importantly, these products require high speed to market and inventory turnover. Now ocean freight is not only expensive but also slow, with the Cape diversion making delivery times completely unpredictable. To catch summer promotions or the peak season in the second half, some sellers have to reluctantly switch from ocean to air freight. So for sellers with low-to-mid unit prices and strong time sensitivity, the problem is not just that ocean freight is more expensive, but that unstable delivery times force some high-priority cargo to shift to air freight. Against the backdrop of disrupted Middle East airspace and hubs, and shrinking global air cargo capacity, air freight rates are also rising, so sellers may face pressure from both ocean and air freight simultaneously.
3. High-unit-price/high-value-added sellers: painful but manageable
High-unit-price, high-value-added sellers are usually better able to absorb unit freight fluctuations, but their core challenge is the risk of stockouts and increased working capital tied up. Higher freight rates, longer transit times, and deeper overseas warehouse stocking significantly increase cash flow pressure.
How should export sellers respond?
Complaining about the macro environment is pointless. In the current environment of high freight rates, high volatility, and high uncertainty, the first thing companies should do is not bet on a reversal of the situation, but rather recalculate profit models, diversify logistics routes, protect cash flow, and gradually enhance supply chain localization and regionalization capabilities. First, recalculate profit models and actively test price elasticity. Re-run SKU profitability with higher freight rates, surcharges, longer transit times, and capital occupation. Cut losses on unprofitable SKUs, and test price increases on core SKUs in small steps. Second, establish multi-layered logistics solutions. For the European market, re-evaluate alternative routes such as rail. For bestsellers needing urgent replenishment, allocate a small portion of high-priority cargo to air freight or faster options, but adjust dynamically based on current airspace and hub availability, and avoid mechanically relying on Middle East transshipment. For companies of a certain size, use a combination of "long-term contracts for the base, spot for peaks" to reduce volatility. Third, put cash flow ahead of growth. Postpone high-uncertainty investments, seek longer payment terms, improve collection efficiency, and strictly control slow-moving inventory in overseas warehouses. Fourth, gradually build a supply chain closer to the market. This may not be the only way for all companies, but it will increasingly become an important barrier for companies to navigate cycles.
Conclusion:
Survival rules for a new era
Our generation has been spoiled by the golden age of globalization over the past decade or more. We are used to an extremely stable, low-cost, and punctual global shipping network; we are used to a peaceful world where making good products and running operations well is enough to make money. But today, with the smoke rising over the Strait of Hormuz, we must clearly recognize: the era of peace and stability is completely over. Future global trade will be accompanied by long-term geopolitical friction, black swan events, trade barriers, and supply chain disruptions. The sharp fluctuations in freight rates are no longer occasional anomalies but the new normal for export operations. Survival of the fittest is cruel. Every surge in ocean freight rates will mercilessly wash out a batch of extensive sellers who rely on dividends and lack core barriers; but at the same time, it will push truly strong companies with strong supply chain integration capabilities, refined operations, and keen macro awareness to higher peaks. The bigger the waves, the more expensive the fish. The waters of Hormuz are churning, global freight rates are surging. In this era of reshuffling, survival is the ultimate principle. Welcome to add the author's WeChat (note company-position) to join the China consumer brand export discussion community.