How the Iran conflict is reshaping shipping and exposing Sri Lanka’s freight vulnerabilities
The escalating conflict involving Iran in the Middle East is reverberating across global shipping lanes, triggering higher freight rates, risinginsurance costs and growing uncertainty across international supply chains. For Sri Lanka, an island nation whose economy is closely tied to maritime trade, the crisis has begun to reshape logistics patterns, affect trade costs and highlight both strategic opportunities and long-standing gaps in the country’s freight capabilities Experts say the tensions in the Persian Gulf and surrounding waters have created ripple effects across the Indian Ocean region, affecting everything from fuel shipments and cargo insurance to shipping schedules and port traffic.
Industry leaders and maritime security specialists warn that while the crisis poses risks to Sri Lanka’s supply chains, it could also elevate the strategic importance of the island’s ports, particularly the Port of Colombo, as global shipping lines adjust their routes.
Chairman of the Sri Lanka Freight Forwarders Association and Managing Director of MAC Supply Chain Solutions (Pvt) Ltd Andre Fernando, speaking to the Daily News says the conflict has already begun to influence shipping operations linked to Sri Lanka.
According to him, vessels that normally carry cargo into Middle Eastern ports are now adjusting their schedules due to security concerns.
“Shipping lines are currently discharging cargo at the ports of Hambantota and Colombo because they are unable to carry cargo into the Middle East,” Fernando explained. “Since Colombo is the last port of call before vessels enter the Middle East, many shipping lines are unloading cargo here and then continuing to other destinations while bypassing Middle Eastern ports.”
Such operational changes are beginning to alter logistics flows across the region and increase pressure on shipping costs. “Freight rates have increased significantly. Shipping lines are imposing additional charges such as war-risk surcharges and emergency fuel surcharges, which are contributing to higher logistics costs,” Fernando noted.
The rise in freight rates is further compounded by surging war-risk insurance premiums, which shipping companies must now pay to operate vessels through volatile waters.
Key Export and Import Sectors Affected
The impact of the conflict is expected to be felt across several sectors of Sri Lanka’s trade.
Fernando said both exports and imports are likely to experience disruptions.
“Both exports and imports are affected,” he said. “On the export side, products such as tea and spices are likely to feel the impact, while imports such as coal, petrochemicals and various consumable goods could also be affected.”
Sri Lanka’s heavy reliance on maritime imports makes the country particularly vulnerable to disruptions in Middle Eastern shipping routes.
“Sri Lanka is highly vulnerable, especially when it comes to imports,” Fernando explained. “The country depends heavily on supplies coming from the Middle East region. Key imports such as fuel, petrochemicals and raw materials used in plastic manufacturing come through this region.”
Any interruption in these flows could therefore have consequences for industrial production and energy supply within the country.
Fernando emphasised that the main concern is not necessarily disruptions to the Suez Canal but instability in another critical maritime chokepoint.
“The main concern is not the Suez Canal itself, but disruptions around the Strait of Hormuz, which is critical for energy shipments,” he noted.
Colombo Could Benefit from Shifting Shipping Patterns
Despite the challenges, the conflict could bring certain advantages to Sri Lanka’s port sector.
Fernando believes that Colombo’s position as a key transshipment hub in South Asia could attract more vessel calls as shipping companies adjust routes and logistics operations.
“There may actually be a positive impact for the Port of Colombo. More vessels may call at Colombo, both at the port itself and within the Outer Port Area for various services,” he said.
Changes in maritime routes could also affect cargo movement patterns.
“Longer voyages are likely to increase transit times, but they are unlikely to reduce cargo volumes. In fact, Sri Lanka could potentially see an increase in volumes as a result of the situation,” Fernando added.
This could strengthen Colombo’s role as a logistical hub in the Indian Ocean region.
Missed Opportunities in Air Cargo
However, Fernando says the crisis also highlights a major missed opportunity for Sri Lanka’s logistics sector.
According to him, Sri Lanka could have capitalised more effectively on the disruption if the country had developed a stronger air cargo capability.
“One potential solution for Sri Lanka would be to operate dedicated cargo freighters,” Fernando said. “If Sri Lanka had cargo freighters available, they could operate to a hub in the Middle East, such as Omanand distribute cargo from there.”
Such a strategy could have allowed Sri Lanka to position itself as a regional logistics centre for freight moving into the Middle East during periods of maritime disruption.
“If SriLankan Airlines had dedicated cargo aircraft, it could have maximised profits and revenues by operating freight services into the region,” he added.
However, the opportunity may now be more difficult to capture.
“Charter costs have already risen sharply, so entering the charter market now would not be very economical,” Fernando cautioned.
The situation illustrates how global logistics crises can create opportunities for countries that are prepared, but also expose structural gaps for those that are not.
Maritime Security Concerns in the Indian Ocean
Meanwhile, Rear Admiral (Retd) Y.N. Jayarathna, former Chief of Staff of the Sri Lanka Navy and Chief Hydrographer of the Navy and Joint Chief Hydrographer to the Government of Sri Lanka, says the conflict has serious maritime security implications for the entire Indian Ocean region.
According to him, the waters of the Persian Gulf, Strait of Hormuz and Gulf of Oman are central to global energy supply chains.
“These waters hold the key to the world’s crude oil supplies by ships, followed by refined petroleum supply to the adjoining region,” Jayarathna explained.
As tensions rise in these waters, maritime security risks multiply.
“Disturbances in Middle Eastern waters generate maritime security concerns due to regional and extra-regional navies moving in and out of the Persian Gulf, the involvement of ballistic and cruise missiles in modern war-fighting and the presence of non-state actors wielding weapons that the world has not seen before,” he said.
These developments could have political and economic repercussions across Indian Ocean countries.
“All these add up to security concerns in the Indian Ocean region and follow-on spillover effects can add stress on the domestic politics of Indian Ocean countries,” Jayarathna noted.
Importance of Global Maritime Routes
Speaking to the Daily News Jayarathna also explained the strategic significance of the two major shipping corridors connected to the Middle East.
“The Red Sea corridor is part of the main sea lane of communication that connects the far-west with the far-east,” he said. “This route is very significant and applicable to Sri Lanka more in terms of ports and harbours rather than Sri Lanka’s own trade.”
By contrast, the Strait of Hormuz is central to global energy shipments.
“The crude oil carriers pass through Sri Lanka’s maritime jurisdiction without making port calls, and the quantity Sri Lanka imports is relatively small compared to the region’s overall needs,” he explained.
Nevertheless, disruptions in these maritime chokepoints can affect global supply chains.
Growing Risks to Commercial Shipping From a maritime security perspective, Jayarathna believes the current situation poses serious risks for commercial shipping.
“The situation is very serious, prompting insurance premiums to go up and causing disruptions in the supply chain,” he warned.
He noted that maritime conflicts historically tend to be resolved quickly because of their global economic consequences.
“This is the very reason that conflicts in the Strait of Hormuz in the past have ended in weeks,” he said.
However, the economic shockwaves could continue long after hostilities subside.
“There will be direct and indirect effects and some of them will be ripple effects,” Jayarathna explained. “The global supply chain will take time to recover and prices may remain high for at least another four months.”
Threats Facing Commercial Vessels
Modern warfare has also introduced new risks to civilian shipping.
Jayarathna warned that commercial vessels could face a range of emerging threats.
“By firing a torpedo in anger the precedent has now been created,” he said. “There will also be cruise missile threats and drone threats as non-state actors now possess these weapons.”
According to him, modern conflict increasingly targets economic infrastructure.
“The changing culture of war-fighting shows that it always targets the economyand commercial vessels are now a target in this new warfare,” he added.
Challenges from Route Diversions
If shipping companies choose to avoid conflict zones such as the Red Sea and instead route vessels around the Cape of Good Hope, the consequences could be significant.
“Navigationally it will consume more time to reach destinations. Operationally it will cost more to ship goods because longer voyages mean longer ship running,” Jayarathna said.
