EDITORIAL: The long-term cost of war extends beyond the destruction it causes and the trade it immediately disrupts. It also changes how countries and businesses source goods, move cargo and assess risk. World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala made this point in a recent interview on the side-lines of the annual meetings of the IMF and World Bank, warning that the wars in the Middle East and Ukraine would leave a lasting imprint on global trade flows. Her warning merits serious attention.
The Iran war has sharply contracted Middle Eastern trade, with the WTO forecasting a 17 percent decline in regional exports and a 15 percent fall in imports this year. Even if hostilities end and the Strait of Hormuz reopens, pre-war trade patterns may not return, as businesses may end up retaining the alternative routes and suppliers they have invested in to hedge against future disruptions.
It is important to recognise that the repercussions extend well past the immediate conflict zones, disrupting trade routes, supply chains and economic activity worldwide. For instance, the Red Sea, Bab al-Mandab Strait and Suez Canal form a vital shipping corridor, linking Asian manufacturers with European markets. Renewed hostilities between Saudi Arabia and Yemen’s Houthis have heightened risks to shipping and energy infrastructure along this route, demonstrating how instability around a single maritime chokepoint can disrupt supply chains across continents. The war in Ukraine has similarly altered established trade patterns, affecting Black Sea grain and oil exports and forcing exporters to find alternative routes and buyers to diversify supplies. The combined lesson is that geopolitical risk is fast becoming a structural cost of doing business. These disruptions are also accelerating the shift towards regional trade as countries seek to reduce dependence on distant suppliers and vulnerable shipping corridors. While this can strengthen regional economic ties, it also risks fragmenting global trade into competing blocs.
The Red Sea crisis since late 2023 illustrates how all these calculations are reshaping global shipping. Houthi attacks on commercial vessels have forced many shipping companies to reroute around the Cape of Good Hope rather than use the Suez Canal, increasing fuel consumption, insurance premiums and freight costs while delaying deliveries. Despite these geopolitical upheavals, the outlook for global trade appears resilient on the surface. The WTO recently raised its forecast for global merchandise trade volume growth to 3.9 percent in 2026 from 1.9 percent in March, largely because of booming demand for AI-related products. Yet Okonjo-Iweala cautioned that this strength could mask less favourable underlying trends. Higher energy and shipping costs raise production expenses, complicate inflation control and disproportionately burden import-dependent economies with limited fiscal and foreign exchange buffers. Developing countries face particular difficulties when more expensive freight and essential imports coincide with weaker currencies and rising debt-servicing costs. Diversification is therefore necessary, but it is not cost-free. Maintaining multiple suppliers, transport corridors and inventories can improve security, yet it also sacrifices efficiencies that made global supply chains competitive. The challenge for governments is to strengthen trade infrastructure, improve regional connectivity and preserve predictable, rules-based market access without allowing security concerns to become a pretext for indiscriminate protectionism.
Okonjo-Iweala is right to warn that some of the changes that have come about in global trade as a result of recent armed conflicts will likely persist even if war ends. Restoring peace though remains essential not only for humanitarian reasons but also for global economic stability. Open shipping lanes, reliable energy supplies and a functioning multilateral trading system are global public goods. The longer conflicts persist, the greater the likelihood that temporary workarounds become permanent divisions in the world economy.
Copyright Business Recorder, 2026