Iran conflict’s closure of the Strait of Hormuz causes major supply chain concerns

Concerns have continued to mount in relation to the major war between the US and Iran, with the closure of the key Strait of Hormuz Middle East shipping route causing major trade delays, writes Neill Barston.

The conflict, which sparked without warning earlier this month, has seen energy prices rise at an alarming rate, with oil prices soaring to $100 a barrel, causing significant delays to transport of key confectionery and wider food sector ingredients including cocoa and sugar.

It also has potentially significant ramifications for other related sectors including glucose, syrups and fats, which are widely used in product ranges throughout the world, with conventional shipping logistics routes in the Middle East now severely delayed and disrupted, market observers have been left contemplating further considerable market disruption.

As reported by a number of national media outlets, fears have been sparked of a global recession due to the situation in the Middle East, prompting America to move today to announce plans that it intended to send naval powers to force the re-opening of the Strait of Hormuz to avert further financial and core supply chain damage, through heightened shipping rates, insurance costs and limiting of available product resources.

According to decision intelligence platform project44, daily ocean freight diversions have increased more  than 360% amid disruption in the Strait of Hormuz, rising from 218 to 1,010 per day.

Its latest stats showed that March 5th marked the highest single-day spike, with 2,363 alterations in routes recorded in a 24-hour period. The surge represents the highest level of rerouting activity recorded in the Strait of Hormuz corridor.

As the intelligence group noted, unlike prior maritime disruptions, there is no long-haul alternative route for Gulf cargo. Several ports are effectively cut off from direct ocean access, increasing reliance on surrounding hubs and elevating the risk of sustained congestion.

This has a number of key consequences, and as diverted volumes accumulate, additional schedule instability and extended transit times are likely across Middle East and South Asia trade lanes.

Furthermore, as the group noted, with continued regional uncertainty and evolving war risk insurance conditions, there is no clear timeline for when transit patterns may stabilise.

Cocoa concerns
Though the Middle East instability is some distance from where cocoa is primarily produced in West Africa, broader ingredient supply chains are affected, and come at a particularly sensitive time for the industry.

As Confectionery Production has previously reported, for much of the last two years, a criss has hit the cocoa trade, as elevated prices on cocoa futures markets in New York and London, placed considerable strain upon global markets. However, the picture has reversed in the past two months, with a sudden spiral downwards over the past seven weeks, which has seen values slump to below $4,000 a tonne from a market high of over $12,000 at the start of 2025. 

Consequently, authorities in Ghana and Ivory Coast have confirmed that they are set to reduce farmer pay by 30% in light of drop in market values, leaving agricultural communities, already struggling from years of being on below poverty line wages, in an even worse position. This has further tested the viability of the sector, with renewed supply chain uncertainty in the Middle East due to the fresh conflict in Iran causing additional disruption.