Israel-Iran Conflict: Supply Chain Risks You Need to Know
by Kevin Baker 15 June 2025
The first thing today, or “first cab off the rank” as we say in Australia, is a heartfelt thank you for reading Baker on Business edition after edition. Your engagement drives my passion for this work. With 23 years of business experience in America, 8 years in Australia, and now consulting globally, I bring a unique perspective to navigate complex challenges like the Israel-Iran conflict’s impact on supply chains. My diverse background informs the insights shared here, helping clients and readers worldwide make informed decisions.
I am committed to making this publication the best it can be, and I’ll continue this effort into the future. Your feedback is invaluable—please share your thoughts to shape what we offer. In this edition, we explore critical supply chain implications of current global events. Thank you for your continued support.
At the end of today’s article I ask for feedback about a test I did recently of more frequent newsletters and my thoughts about putting my social media algorithm research behind a paywall. I lost subscribers over one of those two decisions and am seeking feedback
Now on to my topic.
Supply Chain Implications of the Israel-Iran Conflict
The ongoing conflict between Israel and Iran, intensified by recent strikes such as “Operation Rising Lion” on June 13, 2025, has significant ramifications for global supply chains. Here are the key implications:
1. Disruption of Key Maritime Chokepoints:
• The Strait of Hormuz, a critical passage for approximately 20% of the world’s oil supply, is near Iran and faces heightened risks of closure or restricted access due to Iranian retaliatory threats. This could lead to rerouting of shipping vessels around the Cape of Good Hope, adding 10-14 days to transit times and spiking freight costs by 3-4 times pre-conflict levels.
• The Red Sea and Suez Canal, vital for East-West trade, are also at risk if the conflict escalates to involve proxies like the Houthis, potentially creating significant agricultural trade disruptions
2. Energy Market Volatility:
• Iran’s oil production is currently around 4.2 million barrels per day, making it one of the world’s top oil producers and OPEC’s third-largest member. While Iran’s oil output has not been significantly disrupted as of mid-June 2025, recent Israeli strikes have targeted its critical gas infrastructure, causing partial shutdowns and fires at major facilities such as the South Pars gas field. If the conflict escalates to directly affect oil production or exports—especially through the Strait of Hormuz—analysts warn Brent crude prices could spike to $100-$130 per barrel, with broad impacts on transportation and manufacturing costs globally. The recent surge to $74.23 per barrel following the June 13 strikes underscores the market’s sensitivity and ongoing volatility.
• Production at Israel’s Leviathan and Karish gas fields was halted on June 13, 2025, after government orders citing security risks tied to the conflict with Iran. This move sharply reduced gas flows to Egypt and Jordan, both of which depend on Israeli supply for power generation and industrial use. While the Tamar field is still operating, its output is limited compared to Leviathan, and it cannot fully offset the loss. As a result, Egypt has had to cut gas deliveries to some sectors and may need to adjust its LNG export plans to Europe if the disruption persists. The full extent of the impact remains unclear, with no timeline yet for restarting Leviathan or Karish
3. Impact on Specific Industries:
• Technology and Semiconductors: Israel, known as the “Startup Nation,” contributes significantly to global tech, including chip R&D and cybersecurity. Conflict-related disruptions could delay product launches and affect over $2.3 billion in potential revenue for industries reliant on Israeli suppliers.
• Pharmaceuticals: Companies like Teva Pharmaceuticals, with minimal direct impact so far (Israel accounts for 2% of its global revenue), may face risks if the conflict escalates, potentially leading to shortages of critical medications.
• Agriculture and Food: Iran exports significant agricultural products, such as tomatoes, to Iraq, with 294,472 tons valued at $123 million in 2025, often through formal and unregulated small-scale trade routes [Doc 13]. Meanwhile, Israel’s reliance on agricultural imports, primarily from regions like the EU for fruits and vegetables, could face shifting demand due to regional instability from the Israel-Iran conflict, potentially affecting global agricultural markets. While countries like Uganda, a major coffee and fish exporter, may not directly supply Israel, disruptions in Middle Eastern demand could indirectly influence East African trade patterns if global commodity markets are impacted.
4. Increased Costs and Delays:
• War risk premiums for shipping have jumped tenfold, and airspace closures (e.g., Jordan’s temporary shutdown) have forced airlines to reroute, increasing fuel costs and transit times. This affects just-in-time delivery systems, particularly for FMCG sectors where transportation and packaging costs could rise by 15-25%.
5. Geopolitical Uncertainty:
• The involvement of external powers (U.S., Russia, China) and weakened proxies (Hezbollah, Hamas) creates a fluid risk environment, making long-term supply chain planning challenging. Cyber threats from Iran-linked groups like APT34 could further disrupt operations for firms with ties to Israel.
Strategies for Doing Business in a Conflict Zone
Businesses can adopt the following realist-informed strategies to navigate the Israel-Iran conflict zone and mitigate supply chain risks:
1. Supply Chain Mapping and Diversification:
• Conduct multi-tier mapping to identify dependencies on Israeli or Iranian suppliers. For example, map semiconductor or pharmaceutical supply lines to assess exposure. Diversify sourcing to less volatile regions (e.g., shifting from Turkey to U.S. suppliers for Israel’s raw materials, where imports dropped from $138 million to $13 million for metals between October 2023 and August 2024).
• Develop alternative suppliers and transportation routes, such as using Damietta Port in Egypt, which remains unaffected, to bypass disrupted Israeli ports like Ashkelon.
2. Risk Mitigation and Contingency Planning:
• Implement robust contingency plans, including rerouting vessels around conflict zones and securing additional insurance against war risks. Companies should prepare for oil price spikes by stockpiling critical inputs or negotiating flexible contracts.
• Enhance cybersecurity defenses against spearphishing and malware attacks, especially for firms with Israeli ties, given Iran’s history of targeting critical infrastructure.
3. Leveraging Local Partnerships:
• Collaborate with local firms and governments in stable neighboring countries (e.g., Jordan, UAE) to maintain operations. For instance, U.S. suppliers can capitalize on Israel’s demand for raw materials post-Turkish embargo, leveraging the U.S.-Israel Free Trade Agreement.
• Engage with trusted local sources for real-time security updates, as recommended for navigating the Red Sea’s Houthi threat.
4. Agile Operational Adjustments:
• Adopt flexible logistics strategies, such as shifting to air freight for high-value goods if maritime routes are compromised, despite higher costs. For example, rerouting flights over Saudi Arabia or Egypt can mitigate airspace risks.
• Prepare for inflationary pressures by passing costs to consumers gradually or innovating cost-efficient packaging to offset rises in material costs (8-15% of product cost).
5. Strategic Positioning with External Powers:
• Align with U.S. or EU diplomatic efforts to gain support or incentives, such as tax breaks or security guarantees, while avoiding entanglement in escalation. China’s mediation role offers a neutral channel for trade continuity.
• Monitor sanctions enforcement on Iranian oil exports, which could open opportunities for alternative energy suppliers if volumes drop by 1.4 million barrels per day.
Conclusion: Navigating Business in the Israel-Iran Conflict Zone
As the Israel-Iran war intensifies in June 2025, the anarchic international system underscores the realist principle that survival and security drive state actions—and, by extension, business strategies. The conflict’s disruption of the Strait of Hormuz, energy markets, and critical industries like technology and pharmaceuticals highlights the fragility of global supply chains. Rising costs, delayed shipments, and geopolitical uncertainty demand agile responses from businesses, from diversifying suppliers to fortifying cybersecurity against Iranian threats.
For firms operating in or near this conflict zone, success hinges on strategic foresight. Mapping supply chains, forging local partnerships in stable regions like Jordan or the UAE, and leveraging U.S. diplomatic support can mitigate risks. Contingency planning for oil price surges or airspace closures ensures resilience, while adapting logistics—such as air freight or alternative ports—preserves operational continuity. These measures reflect a rational pursuit of self-interest, aligning with the balance-of-power dynamics at play.
Kevin Baker Consulting stands ready to guide businesses through this turbulent landscape, offering expertise rooted in real-time analysis of power politics and regional shifts. As the war’s shadow looms, the ability to adapt and thrive in conflict zones will distinguish the prepared from the vulnerable. In this unforgiving arena, strategic action, not hope, secures the future.
Published by Kevin Baker Consulting, June 15, 2025
Feedback Request
I recently lost about 5 subscribers in one day which never happens after doing two things. I posted and emailed three times in one week because the Substack algorithm rewards daily posts. Second, I was going to paywall only the social media algorithm boost research I am doing because it has cost me money to conduct the research.
My rationale was also because Substack gives algorithm boost to you when you make them money as buyer or seller, or keep people on the platform longer.
I was going to keep all other Baker on Business posts free. Even if I pay walled everything the free part is still good value. Now I am rethinking my Substack use as a writer and researcher. Feedback?
Kevin writes about leadership, technology, and the human experience at the intersection of both. When he’s not reverse engineering algos, he’s helping leaders remember what actually matters. He runs Executive Forum peer mentoring groups, is a consultant, and educator.
You can find me here:
📍 X (Twitter) – @KevinBakerBiz 📍
Threads –@kevinbakerau
https://www.threads.com/@kevinbakerau
📍 Website: www.kevinbakerinc.com 📍 All my links https://linktr.ee/Kevinbaker