The escalation of the “Red Sea Crisis” amid heightened geopolitical tensions between Israel and Hamas has sent ripples through global trade and operations. This crisis, compounded by geopolitical flashpoints like the Panama Canal and South China Sea, is reshaping trade dynamics and mounting pressure on companies’ logistical capabilities. Consequently, supply chain pressure has emerged as a prominent concern for companies during the first quarter (Q1) of 2024, reveals GlobalData, a leading data and analytics company.

GlobalData’s “Company Filings Analytics Trends & Signals – Q1 2024” report highlights the impact of geopolitical happenings such as the Red Sea crisis on global supply chains, increasing shipping costs and delivery times. A fluid geopolitical environment with other events involving the Panama Canal and the South China Sea has added to trade concerns.

Misa Singh, Business Fundamentals Analyst at GlobalData, commented: “Political instability and geopolitical tensions continue to impact business operations. Regional conflicts are impacting suppliers and companies in sourcing and delivering products.

“The persistent tension in the South China Sea has also contributed to disruptions and as these disruptions reshape freight flow, and subsequently the supply of goods may be delayed and result in soaring shipping costs.”

For instance, Penguin International Limited is experiencing supply chain disruption and cost escalation from European suppliers shipping through the Red Sea. On the other hand, Aerospace, Defense & Security company Airbus SE   discussed benefiting from this geopolitical scenario as there is an increase in air freight demand and prices due to increased container ship voyage times amid the Red Sea and Panama Canal blockages.

Shipping companies are now taking longer routes around the Cape of Good Hope, Cape Horn, and the Suez Canal to get to their destinations. These diversions are putting further pressure on companies for example, Shipping diversions and an arson attack at Gigafactory Berlin-Brandenburg have resulted in Tesla factory shutdowns.

Furthermore, the lack of rainfall in Panama has forced a reduction in the number of vessels traveling through the Panama Canal. SLP Resources Berhad mentioned delays and extended lead time for goods imported from North America, while supplies from the Middle East and Asia Pacific remained unaffected.

Singh Concludes: “Years of disruption following the COVID-19 pandemic and geopolitical tensions have increased the vulnerabilities of global logistics. Many supply chains have become progressively more extensive and interconnected, making them susceptible to disruption and delays and companies will surely keep an eye on how things unfold.”