OPINION: The illusion of oversupply

New ships hitting the water, pressure on rates, and a long-awaited return to “normal” after years of disruption set the stage.

Then, almost overnight, the conversation changed.

At this week’s TPM Conference in Long Beach, the industry confronted a familiar but unwelcome reality: geopolitics can erase capacity faster than it’s ever added.

As the conflict involving the U.S., Israel and Iran escalated, a market defined by oversupply began to look like another potential black swan event.

As Peter Tirschwell from S&P Global put it, the market may be structurally oversupplied, but it is now defined by sudden, unpredictable disruption, with capacity being pulled out in real time.

In practical terms: hundreds of vessels are caught up around the Persian Gulf, insurance has been withdrawn almost overnight, carriers are suspending bookings and rerouting ships, fuel costs are rising, schedules are stretching, and equipment is going out of balance.

MSC has also announced an End of Voyage for all cargo under its care destined for ports in the Arabian Gulf, a rare move that effectively transfers responsibility and cost back to cargo owners once diverted.

Jeremy Nixon from ONE confirmed ships are already turning back and discharging at alternate ports, a scenario echoing the early days of the pandemic.

Only weeks ago, there was cautious optimism that container shipping might finally return to the Red Sea and Suez Canal this year, easing pressure on global capacity. That optimism has evaporated.

With renewed threats from Houthi forces and carriers unwilling to test the security situation, most lines have reverted to the far longer Cape of Good Hope route, a detour that quietly absorbs millions of TEU and tightens supply.

Concerns around the Strait of Hormuz have made parts of the Arabian Gulf effectively uninsurable, leaving carriers with few viable options other than omitting ports and discharging cargo at “least-worst” alternatives.

Despite alarming reports over the weekend, operations at Jebel Ali Port, the region’s most critical hub, have resumed. DP World confirmed terminals are operating under heightened security, and most regional ports remain open, for now.

Air freight is not immune. Flight suspensions and rerouting through the Middle East have already removed a meaningful slice of global capacity, pushing costs higher and adding pressure elsewhere.

Even when conflict is geographically contained, supply chains rarely are. Equipment, capacity and congestion ripple far beyond the region, and what feels different this time is the speed.

For those moving goods around the world, this is once again about adapting in real time.