Preparing for the worst

The impacts of the conflict between Israel and Iran have been on the minds of supply chain professionals for months now, but with the recent involvement from the US, distributors need to be prepared for the implications if Iran retaliates.

On June 22, the US launched a historic attack on three Iranian nuclear facilities in Fordo, Natanz and Isfahan. On June 23, Iran took its first step of retaliation by attacking the US al-Udeid air base in Qatar and a US base in Iraq, leading to Qatar instantly closing its airspace.

While no one is sure yet how Iran will respond, concerns are rising that will directly impact the PHCP-PVF supply chain, specifically markets related to oil and gas. Retaliation could target U.S. forces or allies in the Middle East, especially near the Strait of Hormuz, which would threaten global oil flow. The Strait of Hormuz is one of the world's most important shipping chokepoints connecting the Persian Gulf to the rest of the world; about 20% of global production flows through the waterway. There are concerns about Iran closing the northern side of the Strait of Hormuz, immediately threatening global oil flow. A sharp rise in oil prices would lead to higher fuel and shipping costs, affecting freight, trucking, and container shipping, driving up costs for imported plumbing materials.

Talks around cybersecurity are buzzing as well, as experts warn that Iran has a history of using cyber warfare. Critical infrastructure like ports, transportation systems, or industrial operations could be targeted, causing delayed shipments, port congestion and logistic hub disruption.

As it stands as of June 26, it is unknown if Iran will retaliate in these ways, or if this conflict will escalate. If things do escalate, distributors should be prepared for trade restrictions and embargos, along with the general domestic spending/economic uncertainty that comes along with uncertain and volatile global market conditions.

I tend to be a positive thinker, but in rocky economic times, I’m afraid it’s best to “prepare for the worst” in order to safeguard your business. Hopefully, there is no escalation, and you turn out overprepared — an outcome much better than being underprepared.

It’s time to assess your risk exposure, strengthen relationships with domestic manufacturers and secondary sources, monitor freight pricing and lead times closer than ever, and stay informed by your peers and industry groups.

One thing we know for certain, your role in the supply chain is vital and resilient. No matter the outcome of this conflict and the impacts along the way, I have no doubt PHCP-PVF distributors who are engaged, informed, and relationship-driven will come out stronger.