The Current - How war in the Middle East is upending the global economy

Episode Date: March 23, 2026

Stuck ships, wrong ports, and higher costs: war in the Middle East is causing headaches for worldwide supply chains. New York Times reporter Peter S. Goodman explores the mounting impacts on supply chains that remain highly integrated.

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This is a CBC podcast. Hello, I'm Matt Galloway, and this is the current podcast. It has been just over three weeks since Israel and the United States launched air strikes on Iran. Over the weekend, Iran and Hezbollah targeted areas close to a nuclear facility in southern Israel, wounding nearly 200 people, and Israel continues its assault on southern Lebanon, where more than 1,000 people have been killed. With gas prices soaring and a contracting global economy, President Donald Trump set tonight as a deadline for Iran to reopen,

in the Strait of Hormuz or see its power plants, in his words, obliterated. Iran countered by threatening a total maritime shutdown. Then, early this morning, Trump posted on social media saying, I am pleased to report the United States and Iran have had over the last two days very good and productive conversations regarding a complete and total resolution of hostilities in the Middle East. Based on the tenor and tone of these in-depth conversations, I've instructed the Department of War to postpone any and all military strikes against

Iranian power plants and energy infrastructure for a five-day period. I've been speaking with Greg Carlstrom. He's the Middle East correspondent for the economist. Let's begin with the countdown, this ultimatum, and you have said that Iran will almost certainly not blink on Hormuz. Needless to say, if Trump does this, Iran will respond by attacking similar targets in Gulf states. Where are we at when it comes to this ultimatum? There's a lot of concern about it across the region.

I do not think that Iran is. is going to reopen the strait. It is so central to their theory of the war, this idea of throttling the flow of oil and gas and other commodities and inflicting pain on the global economy. That is their whole strategy here. So they are not going to back down from that. And so the risk is that Trump follows through. I mean, maybe he will, maybe he won't. It's Trump anything as possible. But if he does, we're in a situation where strikes on Iranian power plants obviously will have long-lasting consequences. for millions of people in Iran and then commensurate attacks on facilities in the Gulf.

If they are successful and cause extensive damage could make cities in this region uninhabitable in a matter of days. Last week we saw strikes on energy sites across the region. There was this Israeli attack on an Iranian natural gas field. Iran responded by hitting a refinery in Saudi Arabia, then attacking oil and gas facilities in Qatar and in Kuwait as well. You said on social media that even if the war were to end tomorrow, it would take, what, four months for energy markets to get back to a semblance of normalcy? Why so long? And that is the optimistic scenario, the best case scenario, if the war ends, you know, in the next few days. You think about, let's imagine it stops, the Strait of Hormuz is reopened. What has to happen at this point? First, you have to turn these facilities back on. That's not just a matter of flipping a switch. Oil fields in some cases are being shut in, which means they stop pumping. So you have to restart that. That can be a delicate process. The liquefied natural gas plant in Qatar may take up to seven weeks to turn it. back on and chill it back down to the extremely low temperatures that are needed to liquefy gas.

That's the first step. Then you need to bring tankers back to the Gulf. They need to feel that it's safe to transit, the Strait of Hormuz. It may be some time before sailors think that's safe to do. And some of these tankers are now extremely far away. They've diverted to America or elsewhere to pick up cargoes bound for Asia. So it could take months to bring a large number of tankers back to the Gulf. And even then, once they pick up cargoes and deliver them to countries in Asia or elsewhere, those countries will need to turn on refineries and regassification plants that are being switched off right now. And that also will take several weeks. So if it stops today, we're thinking four months. And the longer this goes on, the longer that disruption is going to last.

And so where does this go from here? You have said that there are four options for Donald Trump in terms of how to proceed. Talk, leave, continue, or effort. escalate and that they all have downsides and that Iran has a say in how all of them would play out. And I think he has promised to pursue each of those options sometimes in the same day over the course of this war. There is the possibility of a negotiated ceasefire, a deal with Iran, but I think that's very, very unlikely, given the lack of trust between the two parties, given the questions about who is actually in charge in Iran, and given the enormous differences they would have in their demands for any ceasefire. There's a scenario in which Trump just declares victory. It gives a very

Trumpy speech where he says Iran's military has been obliterated, and this is the greatest victory of all time, and he walks away. You can imagine Trump doing that. He did something similar after the strikes on Iran's nuclear facilities last summer. But if he did that, he would leave Iran in control of the Strait of Hormuz. And that's a situation that America's allies in the Gulf, among others, would be furious about. He could continue the war for the period of several weeks. That's what the Israelis would like to do. They're talking about a war that goes at least through the Passover holiday, which ends on April 9th. He could continue airstrikes, move more naval assets to the region, and hope that at some point we reach a tipping point where the regime can't carry out attacks on neighboring countries or perhaps it

collapses altogether, but there's no guarantee that that happens, that it actually works. And then the final option, escalation, is what we're seeing. with these threats about strikes on power plants, this talk of trying to seize Harg Island, which is the home to Iran's main oil export terminal. There are things that America could do to escalate the conflict, but all of them are extremely risky. As you say, starting a war is easy, finishing it is hard. And particularly when you're not sure what your desired end state is for that war,

I really believe the Trump administration went into this expecting, it would be brief, expecting that somebody would cut a deal. Some figure in the regime would make a deal with the United States. That hasn't happened. The Strait of Hormuz has been shut, which they should have planned for, but it seems they didn't plan for. And now they're trying to figure out not just how to proceed operationally, but what the ultimate strategic aim of this war is. Greg, we'll talk again. In the meantime, thank you for this. Thank you. Greg Carlstrom is the Middle East correspondent for the economist. for everyone. You need grit to climb this high this often. You've got to be an underdog that always

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now is the time to explore Europe's waterways. Learn more at viking.com. This war is already upending the global supply chain. Denise Ho has worked in the shipping industry for over 25 years, and over these last few weeks, the phone in her office in Montreal has been ringing off the hook. It's not a pleasant conversation because it's not good news. It's not like, oh, surprise your shipment arrived early.

Denise oversees international logistics for her Canadian clients trying to move goods across the globe, and lately she's been breaking bad news. The outside carriers, the ships that move that cargo, are hiking their costs even higher. They implement things like war risks or charges. emergency fuel surcharges, sometimes with very, very little notice. A war risk surcharge per container, a 40-foot container, that's the longer one, can be at $3,000 U.S.

Sometimes the transport itself is costing $3,000. On top of doubling costs, some exporters are even seeing their Middle Eastbound cargo end up in a completely different place. That uncertainty has been the focus of Peter S. Goodman's latest reporting. He is a New York Times journalist who's followed the ups and downs of global trade for more than 25 years. He's also the author of an excellent book called How the World Ran Out of Everything Inside the Global Supply Chain. He's in New York City this morning. Peter, good morning to you. Good morning.

You just heard what Denise is going through. How similar are the stories that you're hearing from other ports and businesses around the world about what this war has done to their business? You know, these stories are legion all over the globe. And, you know, I think it's worth remembering that, you know, most people. people don't think much about the container shipping industry. We take it for granted. It's like, you know, we flip on the light switch. We don't think about all the stuff that has to happen behind the wall to make the lights come on. It's the same with container shipping until something goes awry. And I think the last time most people remember things going awry during the pandemic,

where we had tremendous disruptions, lots of shortages. And there's a similar dynamic now because there's, you know, scores of ocean carriers, but they're organized into three alliances that really dominate the key routes. And those are the ones from North America to Asia, North America to Europe. And we're talking about three alliances, sort of like, you know, your airline alliances, Star Alliance and what have you,

that control 90 plus percent of the traffic on those routes. So anytime shippers get anxious about finding a place for their ships, the carriers can jack up prices beyond any underlying costs. And so all these surcharges, you know, obviously it's more complicated if you're moving cargo around the world to deal with a war in the Persian Gulf,

but how much more complicated and at what expense? I mean, shippers are really sort of at the mercy now of these ocean carriers. You have a great snapshot of this in one of your pieces, an example of a guy from Toronto, Amer Zaidi, who had to ship, what, fabric from a mill in Istanbul to a customer in Shanghai. Yeah, this is a guy who's been in the textile industry for 30 years. He's got a bunch of mills around the world. Normally that journey would cost $2,000 to move some fabric from Istanbul to Shanghai. And with the surcharges that the carriers put on his load, this was about a week ago, it was five times as much. He was looking at $10,000 U.S. dollars for that journey. That's wild. In part because those prices will be passed along to everybody who's further down

the supply chain. Oh, 100%. And, you know, the last time I looked at this in some detail, People may remember the Houthi rebels in Yemen opening fire on ships that were heading up the Red Sea toward the Suez Canal. This is a major artery linking Europe to Asia. And as a result of that, ships, instead of going through the Suez Canal, had to go the long way around Africa. Now, you know, that involves longer hours for crew, more fuel spent. But I had experts tell me that the impacts were maybe, you know, 40% additional costs. to the carriers, and yet the price to people moving cargo was sometimes 300, 400% higher for the additional rate. So there's a lot of monopoly power in this, and the ocean carriers have

turned every crisis into a moment for tremendous pricing power. You wrote in the times that war has a way of exposing vulnerabilities that arise from interconnection. But you also quoted somebody saying, and we've talked a lot about oil and gas, that this isn't just an oil story. This is an industrial supply. story. So what other industries are being pinched right now? Well, the most obvious one is fertilizer. So, you know, nitrogen fertilizer is the chemical food stock for something like half of the world's food supply. And 35% of urea, that's the most important type of nitrogen fertilizer, is coming out of the Persian Gulf. And at the moment is on the wrong side of the straight of Hormuz, that, you know,

21 mile wide channel that runs alongside Iran that is effectively closed to transport. So the result of that is fertilizer. I mean, think about the northern hemisphere, right? I mean, farmers are now having to figure out how much fertilizer to apply, what crops should they grow. And with the price of fertilizer now skyrocketing as a result of this, they're likely to apply less fertilizer. That's going to hit yields, smaller harvest, less food, higher food prices.

And in really vulnerable parts of the world, like some Sahara and Africa and South Asia, we're talking about malnutrition. You're also talking about petrochemicals. Sulfur is a byproduct of making oil and gas. That goes into making metals. Turns out that if India can't ship basic chemicals needed to make pharmaceuticals, that hits the pharmaceutical supply chain around the world, helium comes out of the Persian Gulf, we use that to make computer chips. So all of these, these are just a handful of elements in the industrial supply chain that are now threatened by this conflict. It's fascinating because the web gets bigger and bigger. And it feels like there are hooks in every possible part of our life.

One of the things you talk about producers of shrimp in Southeast Asia where a lot of our shrimp comes from. Can't ship their things here to North America. Tropical fruits from parts of the world aren't able to move. The list gets longer and longer of the number of things that will be disrupted, because of this war. That's right. And it's very unpredictable. You know, I mean, what we learned during the pandemic is if suddenly there are all

these ships that are stuck off the coast of Southern California in a massive floating traffic jam, that means there are fewer containers in China to pick up the next load of whatever headed for who knows where. Well, it's a similar dynamic. So it's very difficult. I spoke to a shipping agent in Vietnam. It's very difficult for them to get refrigerated shipping containers. And as a result, yes, tropical fruits, shrimp, fish, headed out toward the rest of the world,

even in places that would seemingly be unaffected by a conflict in the Middle East, the cargo rates are skyrocketing and it's hard, hard to get space. This sounds like the beginning of the contraction that we saw during the pandemic. You can imagine people listening to this thinking, I don't want to see this movie again because it feels like that supply chain disruption. Are we getting close to that? in some ways, yes. In some ways, people think it actually could be worse because at the same time, I mean,

the pandemic was something that, of course, was volatile, global. We didn't understand the consequences as it was unfolding. But this is one that is familiar in that it's an energy shock, right? So on the one hand, we have disruptions to the supply chain. That part's familiar. We've got shipping prices going up higher. At the same time, we've got demand potentially being hit by higher priced fuel, gasoline. So that adds up to potential stagflation.

And if businesses are looking at weaker economic growth and higher costs, they may end up slashing orders for things. If they get that wrong, people may remember that that did happen during the pandemic. A lot of companies, you know, a lot of companies, you know, canceled orders for, computer chips. It's not easy to just turn a computer chip factory back on. And then we had persistent shortages of critical computer chips for cars, you know, for medical devices for years afterwards. And a similar dynamic could be taking shape here. The longer this goes on, the greater the risk. You've written that the reverberations of this conflict will, in your words, amount to a rebuke of the notion that globalization is history, a claim popularized by nationalist movements on most

multiple continents. Tell me more about that. Well, you know, I live through Brexit based in London watching Britain abandon its largest trading partner of the European Union. I'm now living through the second term of Donald Trump, who is, you know, very directly trying to blow up the liberal democratic order, the rules-based trading system. The pandemic disruptions caused lots of companies to think about cutting their exposure to the container shipping industry, to move. move factory production closer to their customers. And so there have been a lot of kind of premature obituaries for globalization. Globalization is definitely changed.

We're more focused on regional blocks like North America, Southeast Asia for China. But, but, you know, this crisis brings home very clearly that we are still dependent on oil and gas. I mean, some parts of the globe, like Europe, China in particular, have made great strides with renewable energy. But boy, if you shut down the Strait of Hormuz and you bottle up a fifth of the world's oil supply, the consequences are enormous. They ripple out. They can be quite dramatic. And fertilizer, you know, same thing. I mean, we are still dependent upon these global supply chains.

And when we interfere with them, the consequences can be quite dire and they can be very unpredictable. I ask that in part because the president has made this made in America agenda a huge part of, of the. his second term in office. And you wonder whether this conflict may prompt more protectionism with countries wanting to insulate themselves from this kind of chaos now, but also in future. Yeah, it could play out. I think that's an important question, because it could play out in multiple directions. This should cause countries to say, we ought to limit our vulnerability to oil shocks and the way we do that is we move faster with renewables. But, But it could also, I mean, in the States, it's certainly just reinforcing this idea that drill baby drill is a great idea.

Even though, you know, there's a lot of conflating of whose interests are served by higher oil prices. I mean, we hear a lot of rhetoric in the States that the U.S. and Canada, of course, being in the same position, supposedly insulated because of tremendous energy stocks. But those energy stocks are controlled by profit-making companies. I mean, I'm not getting a dividend from Exxon because the price of gasoline is going up. dramatically. So you could see a reach for greater self-sufficiency. You could also see an awareness that we need to limit our dependence on a certain bunch of crucial commodities like chemically engineered fertilizers and oil and gas. And that could argue for greater international cooperation. I'll let you go. But just finally, when this war ends, and at some point in time,

it will, how long will it take for things to get back to normal? How long will it take for the bottleneck to be resolved? It depends upon the industries, but in some instances, it could take months. I mean, we're now at the point, when this started, we were worried about transportation. We had oil and gas, fertilizers that were stuck on the wrong side of the Strait of Hormuz, but we still had production. Then we ran out of storage, so companies that produced those things ran out of places to put them while waiting for the chance for a ship to come and take them away.

Well, now we've actually suffered damage to, you know, liquid natural gas facilities in Qatar, to pick one example. And so it could take months to repair that and to restore normalcy. Moreover, the shipping carriers, so long as there's any anxiety out there, will keep prices higher and that will be inflationary. It's really helpful to hear you talk about this and read your interpretation and your research in terms of how this all work. and the connections between this. The spider web seems to get bigger and bigger and bigger. Peter, I'm really glad to have a chance to talk to you. Thank you very much.

Hey, Matt. Thanks so much. I really enjoyed it. Peter S. Goodman covers global trade for the New York Times. You've been listening to the current podcast. My name is Matt Galloway. Thanks for listening. I'll talk to you soon.

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