The global economy is once again grappling with supply-chain disruptions, as the energy crisis and geopolitical tensions push key logistics indicators to levels not seen since the pandemic. These renewed strains are raising concerns about inflationary pressures and prompting central banks to remain vigilant.
A dashboard of logistics activity reveals that while current stress levels remain below the peaks of the 2020-2023 pandemic era, they are climbing steadily. The disruptions, driven in part by the ongoing Iran war, echo the challenges of that earlier period, when lockdowns, shortages, and shipping bottlenecks disrupted global trade. Logistics, which accounts for an estimated 10% of global GDP, plays a critical role in the movement of goods between suppliers, manufacturers, and consumers.
“The closer we get to actual quantity constraints on key commodities, the more upward pressure we’re likely to see on prices,” said Shanella Rajanayagam, a trade economist at HSBC Holdings Plc.
Rising Costs and Inflationary Signals
Fresh data from the U.S. Bureau of Labor Statistics highlights the impact of these disruptions, with gasoline and grocery prices climbing sharply. The consumer price index posted its largest increase since 2023, and inflation-adjusted wages fell for the first time in three years.
The Federal Reserve Bank of New York’s Global Supply Chain Pressure Index reflects these strains, rising for three consecutive months and reaching its highest level in nearly four years in April. Similarly, the World Bank’s Global Supply Chain Stress Index is nearing its pandemic peak, driven by disruptions in container shipping and port operations. Many cargo carriers have rerouted ships around southern Africa to avoid the Red Sea, adding time, fuel costs, and capacity constraints.
Industry Responses and Challenges
A.P. Moller-Maersk A/S, the world’s second-largest container shipping company, is adapting to an estimated $500 million in additional monthly costs. CEO Vincent Clerc explained that the company plans to pass on these costs to customers through higher freight rates while slowing ship speeds to conserve fuel. However, balancing these measures with maintaining demand remains a challenge. “What is impacting freight rates is the energy shock,” Clerc said, adding that inflation and reduced demand could further complicate the outlook.
Regional and Sector-Specific Impacts
In Japan, the manufacturing purchasing managers’ index (PMI) has surged to its highest level since January 2022, with production and new orders showing significant gains. However, this growth is partly attributed to stockpiling driven by war-related concerns. Delivery times for inputs have lengthened at the fastest pace since the 2011 Tohoku earthquake, raising questions about the sustainability of this boost.
In the U.S., delivery times reported by the Institute for Supply Management (ISM) have also lengthened, with input prices rising at their fastest rate in four years. The Logistics Managers’ Index (LMI) shows mounting pressure across transportation, inventories, and warehousing, with warehousing capacity shrinking at its quickest pace since March 2024. Transport costs have reached their highest levels since 2018, nearing record highs.
Jason Miller, a supply-chain management professor at Michigan State University, noted a slight uptick in shortages of key commodities in the U.S., including aluminum, semiconductors, and electrical components. However, these shortages remain far below pandemic-era levels.
In Germany, Europe’s largest manufacturing hub, energy dependence on the Middle East has heightened vulnerabilities. While demand remains the primary constraint on production, shortages of materials like chemicals and plastics have increased, particularly in the automotive and chemical sectors.
Outlook and Uncertainty
Despite these challenges, experts caution that it is too early to determine whether the current disruptions will escalate into a supply shock comparable to the pandemic. For now, the impacts of the Strait of Hormuz crisis on supply chains in the U.S. and Germany remain relatively contained.
As global trade faces mounting pressures, the focus will remain on mitigating disruptions, stabilizing supply chains, and addressing inflationary risks. Whether these efforts will be enough to prevent a broader economic fallout remains to be seen.