What are New Zealand’s global supply chains being disrupted by the US-Iran conflict?

Source: Radio New Zealand

Explainer – The war raging in the Middle East is affecting supply chains, and New Zealand isn’t immune. What exactly is being disrupted?

There’s a devastating human cost to the conflict, but it’s also worrying many about the impacts on a global economy that’s been battered by years of pandemic, wars and political uncertainty.

With the ongoing conflict between the US, Israel and Iran in the Middle East, the first thing you’re likely to notice in New Zealand is a rise in costs. Here’s why.

What are supply chains?

Basically, it’s how things get to you, and in the modern world it’s an intricate web of travel between trains, boats and trucks.

New Zealand is particularly reliant on supply chains thanks to our geographical isolation – anything that comes into the country has to come via boat or air.

A supply chain doesn’t just mean oil – it includes food, dairy, construction materials and even your latest widget ordered from Temu.

A 2023 report conducted for the Treasury described New Zealand’s international supply chains as “thin and stretched,” noting they could become “more costly and exposed to increased disruptions – reducing the efficiency of the New Zealand economy”.

Our economy utterly depends on imports and exports – Stats NZ says New Zealand’s total annual exports hit $80.7 billion in the year ended December 2025.

Hang on, we’re pretty far away, how reliant are we on the Middle East?

Extremely.

You’ll have been hearing a lot about the Hormuz Strait, which is a narrow passageway between the United Arab Emirates, Oman and Iran that is the only way out of the Persian Gulf. It carries around a fifth of the world’s oil and a large amount of natural gas, but shipping lanes there have been mostly suspended during the current war.

The New York Times has reported that just one or two oil and gas tankers are crossing the strait daily this week – typically around 80 do.

One New Zealand logistics company has said it has the equivalent of 4000 cargo containers in transit in that trade lane, all affected by this week’s conflict.

Between 12 to 15 percent of the entire world’s trade also goes through the region’s Suez Canal, and about 30 percent of global container traffic.

Sherelle Kennelly, chief executive of NZ Customs Brokers and Freight Forwarder, told RNZ’s Afternoons that her industry has learned to be flexible.

“Freight forwarders are really good at pivoting and sort of dealing with crises as they come to hand. This has become part of our DNA now.”

The Hormuz Strait is “one of the most critical marine choke points in the world”, she said.

“The escalations and disruptions immediately impact on oil prices, shipping insurance, freight rate and general global supply and trade confidence as well.”

It’s also a big export market for us – the countries making up the Gulf Cooperation Council, including Saudi Arabia and the UAE, were our sixth largest export market in the year to June 2025, the Ministry for Foreign Affairs and Trade said.

The Meat Industry Association said nearly all our exports to the Gulf Co-operation Council, which were worth $298 million last year, go through Hormuz.

“If Hormuz is closed, congestion and delays will primarily impact chilled exports to the Middle East, which were worth $166 million last year,” an association spokesperson told RNZ.

Why could prices rise because of this?

Kennelly said backlogs and delays have a ripple effect, even if we may not see it instantly.

“What that means for consumers in New Zealand is delays in shipping, the domino effect of shipping lines, the schedules all go out of whack, and then ultimately the price of fuel increases, the shipping rates increase, and then that just spirals through to the checkout for New Zealanders.”

New Zealand doesn’t import crude oil directly from the Middle East anymore, but a huge amount of the world’s oil comes through there, and it’s all connected in the end.

“The Middle East is a key part of the world’s energy supply and so how that trends will have an impact on fuel prices,” Infometrics chief economist Brad Olsen told Checkpoint recently.

“There is a wider concern here that unlike previous challenges in the Middle East and conflicts that you’ve seen in recent years this one looks much more regional and does seem to be expanding.”

If the war continues, it could even hit your interest rates, one analysis found.

During last year’s conflict with the US bombing Iranian nuclear sites, MFAT issued an analysis noting that: “Rising energy costs would weigh on consumer spending, economic activity, and may force the Reserve Bank of New Zealand to hike interest rates in response”.

“A major geopolitical event, such as an escalating or wider regional conflict in the Middle East, would transmit to the New Zealand economy through several channels,” that report noted.

“Oil markets are thinking that there’s at least three months of possible disruption here,” Olsen said.

Finance Minister Nicola Willis told Morning Report on Wednesday that the overseas conflict and global uncertainty was tough on exporters, but information was being provided to them by the government.

“I do want to acknowledge our exporters have been incredibly adaptable but boy oh boy, is it tough for them.”

How have past disruptions been handled?

The Middle East region is a vulnerable chokepoint for global commerce, and not always because of war.

In 2021, the Ever Given container ship ran aground and blocked the Suez Canal for six days, creating a massive backlog of ships, and the impacts stretched right through to New Zealand-bound freight.

Houthi militants in Yemen have also repeatedly disrupted trade in the Red Sea by attacking vessels.

Severe droughts affected the Panama Canal, another prime maritime route, in 2023.

New Zealand has looked at ways to make its supply chain more resilient, such as diversifying suppliers, increasing inventory buffers and securing alternative transport routes.

“There is the possibility of exporters using alternative routes that avoid the Strait of Hormuz,” MFAT’s 2025 report noted. “These include overland routes from ports in Oman or Saudi Arabian ports on the Red Sea.”

However, alternate routes are likely to increase transport costs for exporters, MFAT said.

The government’s work to secure free trade deals with India and China has also helped ensure our supply chains don’t have to just rely on the narrow Red Sea corridor.

That doesn’t help businesses caught up in the immediate Iran situation, though.

“For New Zealand exports if they’re already on the water … that stuff can’t be redirected, it’s sitting out there on the water,” Olsen said.

Global trade requires supply chains to work, ultimately.

“We’ve got our products, we’ve got to get our products to market and the markets are not in the New Zealand region,” Kennelly said.

What’s next?

The short answer is, nobody knows exactly what’s going to happen yet with Iran, Israel, the US and several other countries now involved in open conflict, and US President Donald Trump has been criticised by some for a lack of clarity in what the long-term goal is.

“I don’t think anyone could realistically tell you how long this is going to be and what the impact of this long-term or short-term,” Kennelly said.

Export New Zealand executive director Joshua Tan earlier this week told RNZ that exporters keep a close eye on developments.

“Companies learnt some really valuable lessons about resilience during Covid – certainly the need to increase communications up and down the supply chain, improving relationships with customers and also those logistics providers, but then also the need to consider a just-in-case inventory model in markets and holding higher stock levels overseas.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand