US-Israel-Iran Conflict: The Manufacturing Impacts
Air freight capacity
The conflict has severely impacted air freight capacity, with data from Netherlands-based consultancy Rotate showing global air cargo capacity down 18% from the previous week.
Emirates SkyCargo, the fourth-largest cargo airline by traffic, suspended flights until 3:00pm UAE time on March 2, while also placing temporary restrictions on booking and acceptance of all new shipments for 24 hours.
FedEx suspended flights to and from Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, United Arab Emirates and Saudi Arabia, with pickup and delivery services in several of these markets temporarily halted.
Qatar Airways, which operates 29 Boeing 777 freighter aircraft offering more than 3,000 tonnes of capacity per day, temporarily halted flights due to Qatar’s airspace closure.
The reduction in air cargo capacity has created a bottleneck for time-sensitive shipments, with pharmaceutical companies and technology manufacturers particularly affected.
Freight forwarders report that available cargo space is being prioritised for medical supplies and critical components.
Airfreight rates on key routes have reached record levels, with some shippers reporting costs exceeding pre-pandemic peaks as demand outstrips the severely constrained capacity.
Manufacturing challenges
The disruption could create particular challenges for manufacturers across multiple sectors.
Just-in-time delivery for microchips and consumer technology components has been severely disrupted, with electric vehicle (EV) batteries and semiconductors stranded in the Gulf.
Air freight costs have reportedly spiked, affecting manufacturers dependent on components and Active Pharmaceutical Ingredients from India.
The construction sector faces delays in delivery of Chinese structural steel and specialised materials like heat-reflective glass, which cannot be airlifted.
Multiple companies are invoking force majeure clauses with potential multi-month stop-work orders on major projects.
Simon says: “Just what does happen next now depends on the intentions and actions of several actors and the composition of the next Iranian regime. But for businesses, there is a need to enact contingency plans immediately and begin working through the implications of this conflict lasting weeks or months, rather than days.”
