Escalating tension in Middle East could result in supply chain disruption, higher insurance premiums for shipping

ESCALATED tension in the Middle East with the latest Israel-linked container ship seized by Iran’s Islamic Revolutionary Guard Corps (IRGC) earlier today could result in supply chain disruption and higher insurance premiums, said shipping associations.

Shipping Association Malaysia chairman Ooi Lean Hin said the current geopolitical tension in the Middle East has increased the risk of navigation in the global shipping ecosystem, which is now extended to the Gulf, apart from the Red Sea.

“The safety of shipping navigation is at great risk in the region. War risk insurance premiums will increase, and supply chain disruptions will escalate, leading to an increase in shipping costs for the region,” he told Bernama.

When asked about the impact on the shipping sector, he said that the current situation has had an impact because many shipping companies have directed the majority of their vessels through the Cape of Good Hope in recent months.

“With this move, it takes longer to reach Malaysia. Freight and insurance costs have recently increased,” he explained.

Selangor Freight Forwarders and Logistics Association president Datuk Tony Chia Han Teun said shipping companies are avoiding using the Red Sea and the Suez Canal routes, worrying about being targeted, and the industry is taking a wait-and-see approach to see shipping companies’ next course of action.

“In recent months, many shipping companies have directed most of their vessels to the Cape of Good Hope. Hence, it takes a longer journey to reach Malaysia. The cost of freight and insurance has increased recently,” he said.

Echoing the sentiment, Federation of Malaysian Freight Forwarders vice-president Alvin Chua Seng Wah said the current situation has an impact on Malaysia as shipping capacity to Europe will be reduced.

“We will have fewer vessels with the longer sailing time,” he added.

It was reported that a container ship named MSC Aries was seized by the Sepah (IRGC) Navy Special Forces which carried out a heliborne operation. — BERNAMA