By Carl Tannenbaum

I was working in one of our regional offices this week when the network on our floor experienced a brief outage.  People were clearly not prepared for a return to an analog world, and grew increasingly anxious as the minutes ticked by.

For the second time in six years, we’re experiencing an interruption within the world’s economic network. The impacts from the war in Iran aren’t yet in the same league as the consequences of COVID-19, but they are producing significant anxiety.

There are several forms of disorientation at play.  Firstly, the closure of the Strait of Hormuz has prevented ships from traversing their normal routes.  Some are being sent around the Cape of Good Hope, but this adds two weeks and substantial cost to the journey from the Middle East to Europe.  The BBC estimates that around 800 fully loaded ships are stuck in the region, awaiting an opportunity to progress.  Vessels are out of position, which will challenge logistics far from the fighting.

Secondly, while a primary focus has been on seaborne shipping, air cargo capacity in the Middle East had declined by almost half through the end of March.  Airport closures and route limitations have been common, leading shippers to truck products overland to find exit points.  This has created particular problems for the pharmaceutical sector, which relies heavily on air freight that travels through Gulf countries. 

Thirdly, problems at sea and in the air affect land-based shipping. Trucks and rail cars stand waiting at intermodal ports around the world, creating scheduling challenges.  If cargo does not arrive promptly, bottlenecks in overland transit can accumulate.  And rising prices for diesel fuel are increasing costs for shippers and operators.

During the five-minute outage, partners in my regional office were reminded of how dependent they are on the continuity of a network. The same could be said of the global economy; unfortunately, addressing disruption will require more than a few IT experts.