The United States’ entry into the conflict with Iran triggered violent turbulence in global supply chains, particularly in energy raw materials. The immediate consequence was the blockade of the Strait of Hormuz — a critical maritime chokepoint for approximately 20% of global oil trade. Within just the first few hours, Iran warned ships that passage was not permitted, causing traffic to drop by approximately 70%. This “narrow point” connects the Persian Gulf to the Sea of Oman and handles a daily transit of ~20 million barrels of oil (as well as 22% of global LNG exports). The Hormuz blockade immediately drove up oil prices (from approximately $73 on February 27 to forecasts of ~$80–100 if tensions persist). Analysts warn that a prolonged closure of the strait “will guarantee a global recession.”
For companies manufacturing electronics (and for us as an assembly firm), this means an avalanche of further problems: a drastic rise in energy and fuel costs, delays in maritime logistics, and a deficit of raw materials from the oil and gas industry. As a result, production and component transportation costs are rising. As industry analyses show, on the very first day of disruptions, many shipping companies (Maersk, MSC, Hapag-Lloyd, etc.) suspended transits through Hormuz, and some vessels became stranded in the Gulf area with cargo worth hundreds of millions of dollars. Approximately 170 container ships (450,000 TEU) were en route when Hormuz was closed. Global “just-in-time” supply chains came to a standstill — the slowdown in deliveries will cause parts and component shortages and a spike in prices.
Potential Consequences for Electronics Supply
Although Iran itself is not a significant producer of semiconductors or electronics, its blow strikes the entire global economy. Rising oil prices typically translate into higher electricity costs in factories, higher freight rates (more fuel), and more expensive plastics. Many electronic components — plastic casings, cable insulation, PCB laminates — are made from petrochemicals derived from oil or gas. As noted in the automotive industry, products manufactured today contain enormous amounts of plastics (in vehicles, as much as 150–200 kg of oil-derived plastic). At the same time, prices of petrochemical raw materials (such as ethylene, propylene, polypropylene) are linked to the price of oil and Gulf transit. In a scenario of prolonged Hormuz closure, analysts estimate input cost increases for petrochemicals in the range of 15–25%, which would necessarily translate into significant price increases for electronic components (e.g. film capacitors, insulators, plastics).
The second channel of impact is maritime logistics. Rerouting ships around the Cape of Good Hope alone extends the voyage by up to 1–2 weeks and significantly increases fuel consumption — substantially raising transportation costs. It is estimated that ships carrying goods in both directions will burn several to over a dozen percent more fuel, which will be reflected in freight charges and container availability. Even if the conflict is quickly contained, the logistical mark will remain — port congestion, shipping route restructuring, and the need to “re-fit” supply chains generate delays extending far beyond the original crisis period.
At the macro level, high energy costs and limited oil supply may reduce global demand (consumption) for electronics and electrical devices. Many energy-producing plants are already noting that component manufacturers (from metals to plastics) must seek savings and energy alternatives. For example, automotive companies have begun revisiting investments in energy-intensive furnaces and reinforcing equipment, since rising energy prices rapidly increase the cost of the vehicle value chain. Similar pressure could affect PCB manufacturers or assembly units. From the perspective of our clients — manufacturers of electronic devices — this means the need to respond quickly to rising prices for semi-finished products and transportation fuel to safeguard production continuity and margins.
Scenarios for Further Conflict Development
When considering possible trajectories following the attack on Iran, it is worth preparing several scenarios in terms of supply chain risk. The table below presents example scenarios along with their effects and recommendations:
| Scenario | Description | Impact on Electronics Availability and Prices | Recommended Actions |
|---|---|---|---|
| Rapid conflict escalation | Iran responds to the attack (e.g. missile strikes, blockade of other straits), war spreads across the region. | Prolonged Hormuz blockade or attack on neighbours => even greater oil price increases (potentially >$100) and raw material costs, further shipping delays (more expensive and slower freight); possible embargo on certain components. | Build maximum stockpiles of critical components; accelerate alternative supply chains (e.g. air freight); enforce security clauses in contracts; increase hedging of energy and raw material prices. |
| Maintained blockade (stalemate) | Conflict continues without further military escalation. Hormuz remains closed; Gulf states draw on reserves and pipeline routes bypassing the Gulf. | Sustained high energy prices ($70–80+), limited petrochemical availability and ongoing delivery delays continue to reduce component supply; prices rise (15–25% more for petrochemical materials). | Continue maintaining high inventory levels; shift some supply to local providers (risk of low stocks); optimise energy consumption (move production to “cheap” nights or ease schedules); negotiate long-term contracts with delivery guarantees. |
| De-escalation and ceasefire | A truce is reached between the US, Iran, and allies. Hormuz gradually reopens. | Short-term sharp cost increases and shortages (lines must return to normal flow); then gradual price stabilisation (drop to ~$80) and improved availability within several weeks. | Consider balancing inventories (moderate surpluses only); restore standard transport chains; use the period of relative calm to renegotiate supplier terms and diversify (e.g. second source from a different region). |
| Global economic disruption | Intensified sanctions, involvement of other powers (e.g. Iran allying with China/India), trade war overlapping with armed conflict. | Worldwide economic slowdown, lower demand for electronics; simultaneously component difficulties (partially replaced by domestic equivalents); currency fluctuations may further raise prices of imported goods. | Focus on maintaining stable production (defreezing stockpile options); increase investment in local assembly lines; monitor new trade regulations; long-term consider redesign utilising more readily available parts. |
Each of the above scenarios requires different actions. The worst — most critical — is rapid escalation, in which the conflict intensifies and the Persian Gulf region becomes a logistics-excluded zone. In that case, a swift response must be preceded now by building up resources: parts stockpiles, physically secured energy (e.g. fuel oil or gas reserves for plants), and negotiations with carriers. Even if escalation does not materialise, it is worth being prepared for partial or complete suspension of sea-route deliveries (by preparing, for example, North Atlantic or air freight routes). For the de-escalation scenario, flexibility is key: if a ceasefire brings a reduction in tension, one can gradually return to normal orders and use the moment of relative calm to restructure supply chains.
Recommended Protective Strategies
As both industry analyses and lessons from previous crises (COVID, Suez Canal disruptions, past trade conflicts) demonstrate, multi-variant contingency strategies work best in situations such as the current one. As an electronics assembly company serving clients who manufacture devices, we should focus particularly on:
- Threat analysis and supply chain monitoring: Procurement teams should now be “mapping” their exposure to petrochemical raw materials and parts originating from at-risk regions. This means identifying which components (e.g. plastic casings, insulators, laminates) may suffer from rising oil prices and potential sanctions. Such an analysis will allow for redesigning substitutes where possible, or increasing stockpiles of those critical components.
- Inventory buffering (“safety on the shelf”): Global political risk (wars, tariffs) encourages abandoning strict JIT in favour of a “just-in-case” strategy. Part of the global automotive industry already recommends increasing component inventory levels by several dozen percent to weather supply fluctuations. For electronics manufacturers, this means accumulating larger reserves of key integrated circuits (especially small passives and microprocessors), plastic components, and specialised semi-finished goods that may prove impossible or very expensive to source quickly.
- Source diversification and production localisation: It is recommended to expand the supplier base with alternatives. For example, parts previously sourced from Asia could be considered for purchase from European or local manufacturers, even if more expensive. It is also worth expanding collaboration with several suppliers of the same component (dual sourcing) rather than being dependent on one region or manufacturer. This applies not only to electronic components, but also to packaging materials and budget raw materials (e.g. glass fibres for laminates or semiconductors from less exposed factories). Europe is already introducing its own instruments (e.g. the so-called Chips Act) aimed at strengthening local semiconductor production — it is worth monitoring these initiatives and benefiting from the growth in regional availability.
- Logistics optimisation: In the face of maritime disruptions, alternative routes or modes of transport should be considered. For example, during last year’s crisis in the Bab el-Mandeb Strait, many companies temporarily switched key shipments to air freight, despite the higher cost, to shorten lead times. A similar shift may occur now — although long-distance sea transport is cheaper, a route around Africa extended by two weeks may prove more expensive than shipping part of the consignment by plane. For an assembly company, rapid logistics replanning and negotiations with carriers will be essential (including managing potential disputes with transport insurers over “war risk” rates).
- Commodity risk hedging: Rising oil prices and material costs also mean increasing energy and petrochemical costs. It is therefore worth adjusting the energy budget — accounting for higher electricity prices if electricity comes from gas, or raising the budget for plastics. If the company practises hedging (financial instruments protecting against price fluctuations), it should reassess whether the current level of hedging is sufficient. It is also worth renegotiating long-term energy contracts (e.g. gas) to limit the impact of sudden price spikes.
- Client cooperation and transparency: Since cost increases may be significant (a rise in polymer prices alone could mean multi-million-dollar cost differences for a device manufacturer), it is worth informing clients (device manufacturers) of the risk as early as possible and working together to find solutions. Maintaining open communication will help better synchronise delivery schedules and potential order adjustments.
- Supply chain regionalisation: In the longer term, the Persian Gulf crisis is yet another argument for shifting at least part of production closer to key markets (Europe, USA). The cost-efficiency approach (manufacturing in Asia) repeatedly collides with geopolitical risk. Recent events are a strong impulse to build up stockpiles and invest in local semiconductor and component factories. For our clients (usually European), this means potential greater support for local suppliers and the launch of European assembly lines, which will increase resilience to similar events.
Summary and Recommendations
The US attack on Iran and the blockade of the Strait of Hormuz are factors that directly strike the entire global industry, including the electronics sector. Rising oil prices will be felt by both procurement departments (more expensive raw materials, fuel) and production (higher energy spending). Logistical disruptions and the risk of additional trade restrictions may mean component shortages.
From the perspective of an assembly company and its clients (device manufacturers), the key is to arm oneself with contingency scenarios. We already recommend:
- Increase stockpiles of critical components: even at the cost of higher storage costs — this is the most effective protection against temporary unavailability.
- Diversify supply sources and delivery routes: accelerate contacts with additional suppliers, including local ones or those operating outside the main maritime routes.
- Monitor the situation and analyse risk: map carefully which materials (e.g. plastics, filters, epoxy resins) depend on pipelines or oil markets, and assess exposure to potential sanctions.
- Adjust procurement strategy: apply the leitmotif of “buy now at a higher price rather than have nothing later.” Financially secure the energy and raw materials budget — e.g. renegotiate part of the agreements with price indexation.
- Plan long-term with geopolitics in mind: consider investments in local production capabilities and greater design flexibility to more easily change components used when needed.
In summary: the situation is dynamic and risk is growing. Full stabilisation depends on the outcome of the conflict — which is why it is so important to develop alternative scenarios and actively secure the supply chain. As the experience of the automotive and electronics industries in previous years shows, the best defence is: long-term relationships with multiple suppliers, safety stockpiles, and continuous market monitoring. By acting in accordance with these principles, an assembly company and its clients can reduce the effects of the crisis and maintain production continuity even under exceptionally difficult conditions.
