A recent analysis by The Economist highlights how the ongoing fighting in the Middle East is bringing renewed focus on the Strait of Hormuz. Although this region is critical to about 20% of global seaborne oil trade, it is not the only area of concern when it comes to vulnerabilities in America’s global supply chains and energy supplies due to disruptions at many maritime choke points worldwide.
With more than 80% of global trade being shipped by sea, supply chains around the world move products through maritime chokepoints that are narrow with limited navigation options. Consequently, these chokepoints are susceptible to geopolitical tension, vessel accidents, and weather-related events. While the Strait of Hormuz is a significant maritime chokepoint, the Strait of Malacca also represents an important location as it serves as a critical shipping lane for manufacturers and suppliers based in Asia, sending goods and fuel to U.S. allies and markets. If the Strait of Malacca were to experience any form of disruption, the price of electronics, consumer goods, and fuel coming into U.S. ports would rise substantially.
The Panama Canal represents yet another major maritime chokepoint that is necessary for U.S. trade between the East and West Coast and for exports of agricultural products. With drought having drastically restricted shipping through the Canal, U.S. farmers and manufacturers have had to ship their products through alternative routes that are longer and more expensive, resulting in higher prices for every type of good shipped into the U.S. from South America.
Many more points of concern exist such as the Suez Canal, a vital link between Europe and Asia that was blocked in 2021, resulting in uncertainty, and shipping routes through the Bosporus and Oresund straits (economists researching different scenarios about possible closings have determined that while closing the Hormuz Strait completely may cause severe disruption of oil supplies, other potential disruptions could cause rerouting of orders or total halt of much higher volumes of non-oil goods and add additional inflationary pressure to already economically vulnerable American households suffering from price volatility in fuels).
The U.S. stands to be significantly affected. Increased shipping costs and delays in deliveries may cause further inflationary pressure, disrupt just-in-time inventory systems, and slow supply diversification efforts away from potentially unreliable suppliers. The U.S. Navy plays a critical role in keeping these shipping routes secure, but experts are encouraging increased investments in supply chain resiliency, nearshoring of production capabilities, and the development of alternate energy sources to limit exposure risk.
Given that we are living with great power rivalry and continuing and escalating regional conflicts, Washington should consider all of these shipping choke points as strategic priorities. In addition to being simply economic decisions, diversifying our shipping channels and enhancing U.S. production capabilities is essential to protecting the economic security of the U.S. from disruptions beyond our borders.