No end in sight to the escalation of the Middle East conflict
The logistics industry is looking with concern towards Israel, where conflict which has been simmering for decades has reached a new level with the attack by Hamas on October 7, 2023. It is hard to predict the consequences for the Middle East of Hamas' terror attack and Israel's subsequent military operation. At the beginning of December 2023, no end to the conflict is in sight.
The ongoing situation also has an impact on the Israeli economy. Sectors such as trade and tourism are largely inactive. Economists expect a significant negative impact on the economy, as well as a government deficit. There is a shortage of personnel everywhere, since people are needed in the war. The economic consequences for other regions across the world are still limited – but this may not be the case for long.
Logistics professionals are concerned
At the annual logistics congress, which took place in Berlin in October 2023 with 2,000 company representatives present, participants expressed concern at current events. Above all, there will be further strain on the stable supply of oil as the conflict is taking place in a region with important oil-producing countries. Expensive oil has a negative impact on the costs of production and transport, which have already risen steeply in recent years. Naval blockades could also hinder trade on the waterways vital to global oil transport, and closure of ports would mean that important hubs for various goods cease to function.
Numerous international logistics companies have already discontinued or significantly reduced their cargo flights to Israel. Locally, there is a risk of plant closures if the road infrastructure is permanently damaged.
Many suppliers are limiting production
In October 2023 supply chain experts at Everstream Analytics analysed the extent to which supply chains as a whole are at risk of disruption. According to the report, more than 350 suppliers with international customers from various industries are located directly in the war-hit region. These would normally produce goods for medical technology, industrial machinery, electronics, chemicals, the automotive industry and other manufacturing sectors.
According to the analysis, companies worldwide will be affected by supply chain disruptions if the conflict continues at the current scale. International companies such as 3M, Stanley Black & Decker, Bombardier, Daimler Truck and Flex were named in the report. Above all, the personnel shortage, triggered by the call-up of reservists, is responsible for a considerable cut in production output.
The Middle East conflict could lead to a bromine shortage
Among the largest production facilities in the Israeli capital, Tel Aviv, is Israel Chemicals, an international chemical company and one of the most important suppliers of bromine. This is a rare chemical found in applications including fertilisers and flame retardants. It’s required in many areas such as research and medicine, as well as in the production of batteries and several technical devices. Other companies in Israel, and neighbouring countries such as Jordan, also supply this chemical raw material globally. If production in these industrial companies is permanently disrupted, this could lead to a global bromine shortage, resulting in a significant increase in the price of affected goods.
