Expert comment from Professor of Supply Chain Management, Alok Choudhary.

“The ongoing Red Sea crisis might have far-reaching consequences on the global supply chain, trade, and economic dynamics. Serving as the shortest sea route connecting Asia and Europe, the Suez Canal transports 17,000 ships annually, representing 12% of the world's total trade volume and $1 trillion worth of goods.

“The implications of this disruption on trade are significant. Rerouting ships an additional 3500 nautical miles is expected to result in significant delays, causing logistical challenges for major companies. The increased shipping and logistics costs incurred due to longer travel times are likely to be passed on to consumers, leading to a potential spike in prices for a wide array of goods, from everyday consumer items, oil and gas to crucial components for industries such as automotive and manufacturing.

“The ripple effect on production cycles is a cause for concern, as delays in delivering key components may lead to further disruptions. In particular, the automotive and consumer goods industries may face challenges in maintaining production schedules if crucial components do not reach their destinations on time.

“One of the most immediate impacts could be felt in the oil market, with potential consequences for global oil prices. The disruption in the timely transportation of both refined and crude oil through the canal may contribute to an increase in oil prices. This could have a cascading effect on economies, particularly in regions heavily reliant on oil imports, and may be reflected at fuel pumps worldwide.

“Here in the UK, the rise in oil prices could pose a challenge to economic stability and may halt falling inflation. Higher shipping and logistics costs, coupled with potential delays in the delivery of goods, might contribute to inflationary pressures. This could have broader implications for the UK economy, impacting consumer spending and overall economic growth.”

Read more about Supply Chain research at WMG here: https://warwick.ac.uk/fac/sci/wmg/research/research-areas/supply-chain