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The Impact of the U.S.–Iran Conflict on Global Trade

Part I: Six Layers of Impact on Global Trade

The first layer raises costs (freight / insurance / oil & gas / settlement).

The second layer reshapes structure (bloc formation, friend-shoring, near-shoring).

The third layer pressures the macroeconomy (inflation + tighter liquidity).

The fourth layer changes transaction behavior (buyers demand controllable delivery).

The fifth layer becomes the new normal (controllable but more volatile; stronger players gain share).

The sixth layer reshapes decision-making (from intuition-driven decisions to AI-enabled intelligence gathering).

Below is the detailed analysis:

Layer One: Direct Impacts

(Immediately reflected in cost, timing, and compliance)

1. Shipping Prices and Insurance

War risk withdrawals / premium hikes → freight surcharges, detours, and cost spikes

When conflict escalates, the first reaction is the tightening, cancellation, or sharp repricing of war risk insurance. Shipowners and carriers quickly pass these costs on through War Risk Surcharges, port surcharges, security fees, and other add-ons.

Recent reports indicate that multiple maritime insurers have withdrawn or tightened war risk coverage in the Gulf region, leading to vessel suspensions, rerouting, and rising freight rates.

Electronic interference (GPS/AIS jamming and spoofing) further increases navigation and port operation risks. This pushes insurance and operational costs higher and causes a contraction in available shipping capacity — ships may technically be able to sail, but operators hesitate to take the risk.

Trade manifestations:

• Longer delivery cycles
• Shorter quotation validity periods
• More difficulty securing space
• Traditional peak/off-season patterns disrupted

2. Oil and Gas Trade

The “Hormuz risk premium” → cost increases across the energy and chemical value chain

The strategic importance of the Strait of Hormuz to global energy trade means markets price in risk immediately. According to the U.S. Energy Information Administration (EIA), in 2024 and Q1 2025, oil flows through the Strait accounted for over 25% of global seaborne oil trade — equivalent to roughly 20% of global petroleum consumption. Around 20% of global LNG trade also passes through this corridor.

Even modest increases in uncertainty around navigation safety, loading/unloading operations, or port functioning generate a “risk premium” in oil and gas prices. This spills over into jet fuel, electricity, and chemical feedstocks, raising costs in manufacturing and logistics.

Trade manifestations:

Energy-intensive industries (chemicals, plastics, metals, glass, fertilizers, shipping) raise quotations. Buyers bargain more aggressively, while suppliers find it harder to concede margins.

3. Escalating Payment Frictions

Sanctions / counter-sanctions expectations → settlements become slower, more expensive, and more selective

Military conflict is typically accompanied by expanded sanctions and tighter compliance scrutiny. The U.S. Treasury and FinCEN have recently emphasized identifying and disrupting Iran-linked shadow financial networks and illicit oil and shipping networks. Banks and trade finance institutions tend to adopt a more conservative “de-risking” stance.

Trade manifestations:

• Harder issuance of letters of credit
• More circuitous payment routes
• Longer payment terms
• More detailed compliance documentation (origin certificates, title documents, AIS tracking history, sanctions screening)
• Cash-flow pressure hits SMEs first

Layer Two: Political Landscape Impacts

(Strengthening geoeconomics → more visible bloc-based trade and investment)

1. Strengthening of Geoeconomics

Trade decisions increasingly prioritize “security and controllability” over cost alone. Countries elevate supply security to a national strategy. Energy, critical minerals, shipping lanes, and key manufacturing segments become more tightly integrated into industrial policy and security reviews.

2. A Layered Global G2 Trading Environment

Rather than simple “decoupling,” the reality is layered coexistence of regulatory, financial, technological, and shipping networks. Compliant supply chains become more transparent — and more expensive. Gray channels become discounted but carry higher risk. This could produce dual pricing systems for similar goods.

3. Rising Importance of Near-shoring and Friend-shoring

The focus shifts from “efficiency optimization” to “resilience optimization.” Large-scale de-risking comes with significant long-term cost and output implications — essentially trading higher structural costs for greater security and predictability.

Layer Three: Economic Impacts

(Energy shock → inflation → financial turbulence & liquidity tightening → uncertain recovery)

1. Oil Price Surge and Rising Inflation

A classic supply shock. Higher energy and freight costs push inflation higher across both goods and services. Net energy importers are hit hardest. Corporate margins are squeezed, making firms more cautious about investment.

2. Increased Financial Volatility

Conflict escalation typically leads to:

• Higher equity volatility
• Widening credit spreads
• Capital flows toward cash, short-duration instruments, and safe-haven assets
• More selective cross-border capital flows

3. Potential Pause or Delay in U.S. Rate Cuts

If energy-driven inflation proves persistent, the Federal Reserve may find it harder to cut rates smoothly. This would tighten global financing conditions and dollar liquidity, increasing recovery uncertainty — especially for economies with high external debt and weaker current accounts.

Core logic of this layer:

Energy shocks push inflation back to the forefront, compress monetary policy space, and ultimately affect global demand and trade volumes.

Layer Four: Rising Buyer Risk Aversion

(More conservative trade terms; preference for “local” or controllable delivery)

Conflict pushes buyer behavior toward:

• Shorter supply chains: Preference for near-shore/friend-shore suppliers or at least local warehousing and service capabilities
• Stronger contractual terms: Stricter delivery penalties, higher safety stock requirements, more frequent rolling forecasts
• Lower tolerance for risk: Higher entry barriers for suppliers exposed to sanctions, shipping disruption, or settlement risks

For sellers, competitiveness shifts partly from price to delivery reliability (local warehouses, customs capability, alternative routes and settlement channels).

Layer Five: Long-Term Trade Impacts

(Controllable but more volatile; more pronounced K-shaped divergence)

1. Trade will not collapse — but risk premiums become structural. The system adapts via higher prices, rerouting, inventory increases, and supplier substitution. Trade becomes more expensive, slower, and more complex.
2. Greater volatility. War risk and navigation risks often shift abruptly, making risk management capabilities central to corporate survival.
3. K-shaped divergence. Upside: Firms with multi-regional production, local warehousing, and diversified settlement channels gain share. Downside: SMEs reliant on single origin points or single routes with thin margins face pressure from higher costs and longer payment cycles.

Layer Six: Technological Impact — AI

1. At the National Level

AI industrializes the cycle of intelligence gathering, assessment, and decision-making.

Modern conflict relies on high-frequency, multi-source fragmented data (shipping data, public information, pricing signals, social media, etc.). AI excels at:

• Multi-source integration
• Early warning signal detection
• Scenario modeling and resource allocation

This transforms isolated advantages into systemic advantages.

2. At the Industry Level

AI converts “risk” from an uncontrollable uncertainty into a manageable variable:

• Risk pricing (freight, insurance, rerouting probabilities, default probabilities)
• Compliance automation
• Supply chain resilience modeling

3. For Chinese Exporters

AI enables:

• Dynamic pricing
• Risk-based credit allocation
• Delivery strategy optimization
• Inventory scenario modeling

The goal is to shift from intuition-driven action to data-triggered disciplined execution.

AI does not predict the future — it stabilizes profitability under uncertainty by:

• Identifying risks earlier
• Enabling faster aligned decisions
• Allowing controlled expansion with quantifiable exposure

Part II: Five Layers of Impact on Chinese Exports

Layer One: Immediate Pain Points

Shipping & Insurance

War risk premiums and electronic interference make China–Middle East routes more expensive and volatile first. Freight rates (e.g., Shanghai to Dubai) have reportedly more than doubled. GNSS/GPS interference further degrades schedule reliability.

Manifestations:

• Shorter quotation validity
• Harder booking
• Uncertain arrival times
• Greater rerouting and split-shipment requests

Energy Spillover

Rising oil and jet fuel prices raise China’s export cost base, especially in manufacturing and logistics.

Payment Frictions

More compliance scrutiny means slower collections, stricter documentation, and greater SME liquidity pressure.

Layer Two: Structural Reshaping

Buyers increasingly prioritize supply security over lowest cost.

Orders may not disappear — but delivery formats change.

Chinese suppliers may need local warehousing, final assembly, or after-sales presence in buyer markets.

Layer Three: Secondary Demand & Liquidity Impact

Energy-driven inflation makes overseas demand more selective.

If U.S. rate cuts are delayed, global dollar liquidity tightens.

Stronger buyers remain stable; weaker buyers delay or default.

Layer Four: Buyer Risk Preference Upgrade

Buyers demand:

• DDP/local delivery
• Alternative routing plans
• Full compliance traceability

Operational priorities for exporters:

• Adjustable surcharge clauses
• Regional forward inventory
• Clear Incoterm risk allocation
• Stricter credit control

Layer Five: The New Normal for Chinese Exports

Trade becomes more event-driven and volatile.

Firms with:

• Local delivery capability
• Multi-channel settlement
• Diversified supply nodes

will gain share.

Highly exposed sectors:

• Middle East–dependent, time-sensitive goods
• Energy-intensive manufacturing

More resilient:

• Branded, service-bound, project-based exports