Paradigm shift: How Middle East conflict is reshaping global trade

Author: Hebatallah Adam

In September 2026, UNCTAD warned that the recovery in trade volume could still leave smaller companies out of global value chains. Bigger firms are likely to be able to fund inventories or reschedule suppliers

On October 7, International Energy Agency member governments backed faster emergency oil stock releases and prioritising diesel where possible. Far from the war zone, governments are accessing emergency stocks and companies are changing the way they fund purchases that may be slower.

The crisis is transforming the dynamics of economic influence. Countries and companies that provide replacement energy, transportation or credit are becoming more significant for trading partners. The challenge for the Global South is to maintain the flow of vital trade and to secure influence over the infrastructure and finance that underpin it.

The strategic value of trade routes

In 2025, the IEA estimates that about 25 percent of global seaborne oil trade went through Hormuz, of which approximately 80 per cent was headed to Asian countries. The strait was also used by nearly one-fifth of the world’s LNG trade. The disruption at Strait of Hormuz can restrict energy supplies and increase production and transport costs across importing economies, with Asian countries particularly exposed because of their reliance on this route. Geography places constraints on remedies available. To bypass the Suez route, ships sail around Africa’s Cape of Good Hope, although this extends the journey.

Before a Qatari LNG cargo can reach either destination, it must leave the Gulf. The IEA points out that the impacted Gulf LNG exports are stranded. Importers unable to receive those shipments may therefore need to buy LNG from producers outside the region. Longer voyages also absorb shipping capacity. According to UNCTAD’s Review of Maritime Transport 2025, volumes of seaborne trade expanded by 2.2 per cent in 2024. However, ton-miles grew by 5.9 per cent due significantly to rerouting. Increased shipping activity reflects the additional time, fuel and expense of avoiding disrupted routes, rather than a comparable expansion in trade.

Recurring Shipping Delays

Commercial impacts remain after a ship has altered course. More extended trips may leave an exporter waiting for payments to be received while wages and supplier bills still fall due. Firms may need to keep a larger stock to ensure that deliveries will occur as scheduled.

In September 2026, UNCTAD warned that the recovery in trade volume could still leave smaller companies out of global value chains. Bigger firms are likely to be able to fund inventories or reschedule suppliers. Governments should therefore look should beyond rising export revenues and check the ability of smaller exporters to retain customers. The financial constraint also works on the national level for poorer importing economies. The IMF warns that low

levels of reserves and restricted access to capital make the higher import bills particularly hard to absorb. Firms that have suppliers overseas can be under pressure due to currency depreciation. National responses therefore need to consider foreign exchange availability as well as domestic credit.

Energy wealth is not a sufficient safeguard when countries cannot reliably deliver exports to customers. The World Bank’s 6 October assessment forecasts a contraction in the economies of the Gulf Cooperation Council of 4.3 per cent in 2026, as the limited export volumes have reduced government revenues and output.

Alternative suppliers can gain more commercial significance. According to the IEA’s Gas Market Report for the third quarter of 2026, the expansion of LNG outside the Gulf compensated for roughly three-quarters of the cutbacks in deliveries from the Gulf between March and June 2026.

The terms of adjustment also can be a source of commercial influence. A supplier can obtain a more sustainable relationship with the buyer if they can provide the flexible deliveries, or a lender who can finance the essential imports. Commitments to these arrangements must be examined.

An agreement that solves an immediate supply problem may also commit buyers to particular suppliers or purchasing terms, shaping their options after the crisis has passed.

Egypt provides alternative connections from the Red Sea to the Mediterranean. In addition to the Suez Canal, crude is transported via SUMED pipeline system from Ain Sokhna to Sidi Kerir, close to Alexandria, for export via the Mediterranean Sea. Cargoes, however, arriving at Ain Sokhna via Bab el-Mandeb are still vulnerable to disruption at Bab el-Mandeb. Egypt’s experience also shows the importance of developing economic activity around transport infrastructure. Four industrial zones and six ports are part of the Suez Canal Economic Zone or SCZONE. Sokhna and East Port Said offer manufacturers access to nearby ports for importing materials and exporting finished goods.

The development opportunity for Egypt is to assist businesses in leveraging these port links to produce, process and export their products, as well as to offer storage and logistics solutions.

Industrial zones should act as a link between foreign investors and Egyptian supplies, skilled workers and regional customers. Their success should be evaluated based on domestic value added, continuous export, job creation and production growth.

Priorities for the Global South

Essential imports and viable businesses should be protected immediately. Ministries of finance and development banks should coordinate with local financial institutions for providing temporary working capital facilities and trade finance facilities to the affected exporters. Governments must also ensure the protection of households, without depleting public finances. The IMF’s World Economic Outlook for October 2026 supports the idea of temporary, targeted income support in times of cost-of-living shocks. As far as administrative systems allow, support should be targeted to the most food and energy-price-vulnerable households to maintain resources for necessary imports and productive investment. In the medium term, regional institutions need to coordinate emergency supply mechanisms and eliminate barriers to trade between neighboring economies. For the long term, investments need to increase industrial energy efficiency and reliable renewable electricity generation and link local producers with regional markets. Different priorities will arise for exporters, importers and transit economies.

Safe maritime trade continues to be essential. Governments should cooperate to protect shipping routes and judge their policies by practical results: whether essential imports arrive, whether smaller exporters retain their customers and whether businesses use the infrastructure provided. Securing these outcomes would help developing economies trade more reliably and negotiate from a stronger position.

The writer is a Professor of Economics, Academic Dean of the Jindal School of International Affairs, and Founder and Director of the Jindal Centre for the Global South, OP Jindal Global University, India; Views presented are personal.