What happens in the Middle East doesn’t stay in the Middle East.
The world looks different than it did just a month ago. Geopolitical tensions in the Middle East have disrupted shipping flows, energy markets and supply chains worldwide, putting the global trade system into a period of heightened uncertainty where nothing remains untouched. If and when things return to normal, the consequences could be long lasting.
During the Port of Los Angeles’ April media briefing, executive director Gene Seroka and Dr. Jerrold Green, senior fellow, UCLA Center for International Relations and president emeritus of the Pacific Council on International Policy, outlined how the escalating conflict with Iran is already sending massive ripples across international commerce.
Starting with U.S. shores to set the stage, Seroka reported that the Port of Los Angeles handled approximately 752,000 TEUs (Twenty-foot Equivalent Unit) in March, a solid result despite seasonal slowdowns tied to Lunar New Year and 17 blank sailings. Activity ended just 3% below last year’s elevated period when “importers front-loaded cargo ahead of tariffs.” Imports dipped only slightly year-over-year, while exports rose 7% to their highest level in nearly two years. First-quarter total volume reached 2.4 million TEUs—5% lower than last year’s pre-tariff uptick but in line with the port’s five-year average, signaling relative stability after a volatile 2025.
But while early Port Optimizer indicators suggest April could surpass 800,000 TEUs on seasonal retail replenishment, volatile geopolitics and trade policy are clouding that outlook.
“This instability, whether on shores around the world or right here at home with erratic policy, makes it very difficult for business people to plan,” said Seroka. And while the American consumer has stayed consistent in buying patterns amid soft hiring numbers, modest inflation and companies “digging deeper to save on costs,” at some point, [consumer buying] is going to tip, too.” Inflation has already ticked up a point in March, and with consumer sentiment “reported at a record low,” this raises concerns about future spending.
Tariffs are another wild card, with the Supreme Court strike-down of IEEPA tariffs sending companies scrambling for tariff refunds as the Administration imposes new tariff mechanisms to take their place. “There’s a whole group of companies lining up to recoup those funds—through litigation, legislation or any other available channel. That’s about $170 billion that many of us would like to see injected back into the U.S. economy,” said Seroka.
Middle East Instability
On day 44 of the war with Iran, all eyes are on the Strait of Hormuz, a critical shipping chokepoint. “From the supply chain perspective, on average, that means probably more than 4,500 ships have not been able to go East or Westbound through that strait. It’s going to take months to untangle the supply chain web, if we even get to a point where we can,” said Seroka.
Dr. Green described the situation as a “body blow” to Gulf economies and a turning point in global geopolitics, where “going back might not even be possible.” The United States’ unilateral blockade efforts and broader regional instability are reshaping alliances and trade dynamics. “The world has changed, and it will never go back.”
Attempting a blockade alone also has U.S. implications. “If we’re focused so heavily on the Middle East, who’s paying attention to the South China Sea, to Asia and so on and so forth?” said Dr. Green. “That’s really quite, quite concerning.”
Supply chain implications also extend beyond oil shipments. In the Gulf region, shortages of basic goods are already emerging, while industrial exports such as aluminum and fertilizer remain stalled. The disruption also affects the flow of global labor. Millions of expat workers in Gulf countries may face job losses, which reduces money sent back home to India, Pakistan, Sri Lanka and the Philippines, thus creating additional economic strain in those countries.
Meanwhile, oil prices have surged above $100 per barrel. This directly contributes to rising transportation and logistics costs, although consumers have not yet seen the full impact at the checkout counter. “There’s always a lag,” Dr. Green explained, noting that businesses often rely on existing contracts and hedging strategies before passing on higher costs. Even so, consumer sentiment can’t escape the 24/7 news cycle.
Shifting Trade Routes and U.S Port Dynamics
Over 1,000 miles away from the Strait of Hormuz, traffic in the Red Sea and Suez Canal has declined by roughly 80% amid security issues about Houthi rebel attacks, reshaping global shipping routes. Combined with earlier drought issues in the Panama Canal, West Coast ports like Los Angeles have emerged as more attractive for U.S.-bound cargo, said Seroka, with rising fuel costs and the need for shorter transit times reinforcing this trend.
The speed component is also vital to the Port of Los Angeles’ go-to market approach, said Seroka. “We’ve been keeping up pretty well while China’s cargo has dropped by 20 percentage points, going from 60% of our business portfolio in 2018 to about 40% now, while we’ve continued to grow. We’re also aligned with our shipping partners for nonstop services out of Southeast Asia to ensure that transit time is still very competitive with what they had been accustomed to in North Asia,” whether for finished products shipping to retail or fulfillment centers, or parts and components for American factories.
No matter which way the many moving parts go, the current crisis underscores the interconnected nature of the global economy.
“If our economy is doing better than our partners’, but theirs are declining, it doesn’t benefit us,” Dr. Green said. “We are inextricably linked. Everything is touched by this.”
