Strait of Hormuz remains risk for supply chains

Iran maintains leverage by restricting the Strait of Hormuz ...

A two-week ceasefire between Iran on one side and the U.S. and Israel on the other has been officially in effect since Wednesday. However, it remains fragile, and negotiations for a long-term peace are likely to be very difficult given the contrary positions. Even if there is no further escalation – which we assume will be the case – and the ceasefire is repeatedly extended, mutual threats are likely to become the norm. The Strait of Hormuz is likely to remain a major point of contention. Currently, traffic through the strait is effectively still suspended, and restrictions are likely to occur repeatedly in the future as well.

... which is also relevant for German supply chains.

With de facto control of the Strait of Hormuz, Iran holds leverage over the entire global economy. Even though Europe – and Germany in particular – obtains a large portion of its oil and natural gas from other countries rather than the Middle East, supply chains could be jeopardized. This is because Germany and other European countries import various goods, such as chemicals, noble gases, and aluminum, from countries bordering the Persian Gulf. Furthermore, there is an indirect dependency through countries –particularly in Asia – that are themselves dependent on energy from the Middle East and serve as key suppliers for German and European industry.

Direct dependence, particularly in the case of petrochemicals, ...

Since many important chemicals are derived from petroleum (petrochemicals), and natural gas is required for the production of synthetic fertilizers, a significant portion of the relevant production facilities are located in the countries surrounding the Persian Gulf. Of all goods, the EU economy is likely to be most dependent on imports of petrochemicals and helium from this region. For example, up to half of all EU imports of certain chemicals come from there. In contrast, dependence on aluminum and fertilizers may be lower than commonly assumed.

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