The current conflict involving Iran represents a classic systemic shock to globally integrated supply chains, and one that is already feeding through into UK logistics and manufacturing via cost, capacity, and reliability pressures.
The most immediate effect is energy driven. Disruption in the Strait of Hormuz, through which around 20% of global oil flows, has constrained supply and driven volatility in oil and gas markets. For UK logistics operators, this translates directly into higher fuel costs, which cascade into road haulage, warehousing and last-mile delivery pricing. Evidence from UK agriculture shows red diesel prices nearly doubling, highlighting how quickly energy shocks are transmitted into operational cost bases. For manufacturing, particularly energy-intensive sectors such as chemicals and steel, this is already resulting in surcharges and margin compression.
Another significant impact is on physical supply chains. Rerouting of vessels, congestion at alternative ports and increased insurance premiums are extending lead times and reducing schedule reliability. Airspace disruption and constrained air freight capacity further compound the issue. UK firms are reporting heightened concern around supply chain continuity, with transport and storage sectors particularly exposed. Procurement teams are also facing rapid price volatility and contract instability, which can ripple quickly through production planning.
Thirdly, there is a structural input shock. The Middle East is a key supplier not just of fuel but also petrochemicals and fertilisers. Disruption here raises input costs across food production, plastics, and industrial manufacturing. Over the medium term, this feeds inflation and weakens demand, creating a “stagflationary” backdrop for UK industry.
Short-term mitigation should focus on operational resilience such as: -
- Diversifying routing (e.g. avoiding high-risk maritime corridors where feasible)
- Increasing buffer stock for critical components
- Locking in transport capacity and fuel hedging where possible
- Strengthening supplier communication and scenario planning
Medium-term actions require structural adjustment such as: -
- Dual, or near-shoring critical suppliers to reduce geopolitical exposure
- Accelerating energy transition and efficiency to reduce fuel dependency
- Digitising supply chains for real-time visibility and faster re-planning
- Renegotiating contracts to include flexible pricing and risk-sharing mechanisms
This conflict reinforces a lesson already learned post-COVID and Ukraine, which is cost optimisation alone is no longer sufficient. UK logistics and manufacturing must now prioritise resilience, optionality, and energy independence as core strategic capabilities.
If your business would like support to create and ratify short and medium-term logistics strategies to mitigate these issues, then give Davies & Robson a call to discuss how we can help.
