Supply chain strain surges in April amid Middle East war
Global supply chain pressures surged in April to their highest level since the pandemic-era disruptions of late 2022 – as war in the Middle East drove inflation, aggressive stockpiling, and shortages.
Over a month-and-a-half after the US and Israel attacked Iran, tanker traffic through the Strait of Hormuz is still at a trickle and the Brent crude price remains elevated at approximately $108 – up 80% from $60 in January.
“Even if tensions in the Middle East ease quickly, global supply chains are unlikely to normalize for another six to 12 months,” said John Piatek, vice president, consulting, GEP.
The GEP Global Supply Chain Volatility Index, which tracks 27,000 businesses, jumped to 1.64 in April from 0.57 in March – the highest level since October 2022. An index value above 0 indicates supply chains are being stressed, while a value below 0 means supply chain capacity is being underutilized.
Demand for production inputs rose to its highest level in over four years as factories front-loaded buying activity in anticipation of further inflation and supply disruption. Safety stockpiling spiked to its highest point since January 2023 for similar reasons.
Shortages of materials and inputs likewise surged to the highest level since late 2022 – the tail end of the post-pandemic supply squeeze.
Global transportation costs, meanwhile, hit a record high in April (GEP’s data starts at 2005) amid high fuel prices and freight rates.
Asia had the sharpest deterioration in supply chain conditions, owing to its heavier reliance on Middle Eastern oil. The region’s index score soared to 3.79 from 1.16 in March, reaching the highest point in over four years.
North America’s index score jumped to 1.52 from 0.42 – a 44-month high – as factories in the US and Canada built up inventories.
Europe’s score rose to 1.64 from 0.64 – the highest level in three-and-a-half years – as European factories safety stockpiled more than any other region.
“What stands out in April’s data is how broadly the disruption is spreading. Shortages worsened across every major region, signaling this is no longer an isolated transport shock. Companies worldwide are now scrambling to secure supply and protect themselves against further inflation and disruption,” Piatek added.
