Supply chain risks from ongoing Strait of Hormuz closure

A SENIOR researcher at the University of Wollongong has warned of one of the most significant global supply chain shocks in history from the closure of the Strait of Hormuz.

Dr Ethan Nikookar is a senior lecturer and academic program director for Supply Chain and Business Analytics in the School of Business and deputy director of the Centre for Supply Chain Research.

Both the US and Iran have sought to exert control over the approaches to the Persian Gulf, with Iran announcing a closure to the strait during the weekend.

As reported by the BBC, the Islamic Revolutionary Guard Corps (IRGC) Navy warned on Saturday that "no vessel is to move from its anchorage in the Persian Gulf or the Sea of Oman".

“Completely closing the Strait of Hormuz is unprecedented. The key issue isn’t just the closure itself, but what happens next?” Dr Nikookar said.

“Shipping doesn’t simply return to normal once a route reopens, as recovery depends on restoring confidence across the entire ecosystem.

“There is a significant domino effect down the supply chain, and Australia sits at the furthest end of this chain.”

Dr Nikookar, who is originally from Iran, said the situation also reflected the complexity and sensitivity of the region.

“This is a strategically critical and highly volatile part of the world, and disruptions here carry both immediate and long-term consequences,” he said, noting ongoing risk concerns, insurance costs and supply chain uncertainty would continue to disrupt global trade.

“Even after access is restored, insurers may continue to classify the region as high-risk, which limits vessel movement and keeps costs elevated,” he said.

“This creates a bottleneck effect with fewer ships, higher prices and delays that ripple across global supply chains, including for countries like Australia that rely heavily on imported fuel.”

Dr Nikookar also spoke of the impact upon agricultural products including synthetic fertilisers which require oil.

“We also have to think about the ‘lead time’. If a tanker leaves the Strait of Hormuz and it takes a couple of weeks to reach its destination… Even if the strait is fully reopened today, it is going to take a couple of weeks to see the full impact in countries like Australia that are at the end of the supply chain.”