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Experts Warn of a $50 Trillion Risk in Global Trade If Extreme Conflicts Disrupt Maritime Transport. Understand How This Crisis Could Harm Supply Chains Worldwide and the Impact on International Trade!
In recent years, the maritime transport sector has been adapting to serious geopolitical disruptions, which have been occurring with increasing frequency. From the invasion of Ukraine to Russian attacks on vessels, as well as the blockade imposed by the Houthis in the Red Sea, the possibility of a major conflict is already being considered in all projections from the industry.
However, there has been a lack of a clear metric regarding the financial impact that these conflicts could cause. The insurance company Lloyd’s provided a new perspective by releasing a report with surprising estimates.
The Economic Impact of a Geopolitical Conflict on Maritime Transport
In its latest series on systemic risks, Lloyd’s examined a hypothetical scenario of regional conflict that would trigger enormous disruption in global trade chains. Considering that around 80% of global imports and exports are on ships at sea at any given time, the disruption of these routes poses one of the biggest potential economic risks.
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Iran declared that the security of the Persian Gulf will be for everyone or for no one — and threatened to attack ports of neighboring countries after the U.S. blockade in the Strait of Hormuz.
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A neighboring country of Brazil starts to profit billions from oil after the war in Iran, sees its economy grow at an unusual pace, and enters a silent dilemma that few countries can resolve without a crisis.
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Considered Trump’s last ally in Europe, Giorgia Meloni has just suspended a military agreement of over 20 years with Israel and rejected Italy’s entry into the blockade of Hormuz.
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Through a narrow strait of just 33 km, 20% of the world’s oil passes — the USA has just closed it, the barrel has risen to over $100, and the price at the pump in Brazil has already increased.
In the considered scenario, a superpower invades a large economy, disrupting global trade and supply patterns. This invasion would include attacks on military targets, as well as a physical blockade on trade routes, cyberattacks on critical infrastructure, and disruptions to transport, energy, and communications.
In response, another superpower and its allies intervene, supporting the invaded economy and initiating a regime of sanctions and confrontations that would close the maritime routes nearest to the conflict zone.
This confrontation would escalate into military action between opposing forces, affecting global supply chains for raw materials, microchips, food, and other products. According to Lloyd’s report, “industries reliant on critical materials, such as semiconductors and rare minerals – in the health, technology, and automotive sectors – would face chronic shortages and delays.”
The cascading effects of disruptions to maritime routes would generate inflation in various economies and even food shortages in some regions.
Economic Losses Not Only for the Maritime Transport Sector
Lloyd’s estimates of the economic losses arising from this type of conflict are staggering. The global impact over a five-year period could range from $8 to $50 trillion, representing a loss of up to 7% of the global GDP.
The most likely scenario projected by the insurer points to a loss of $15 trillion. In an extreme scenario, with an impact of $50 trillion, the likelihood of occurrence would be only 0.5%.
Among the most affected countries, China would lead the losses, given its significant integration with global trade. Europe and the Asia-Pacific would also suffer severe impacts, while North America, although less affected, could lose up to $5 trillion over five years, equivalent to 10% of the total global impact.
The conclusions of Lloyd’s study reveal how vulnerable the global trade system is to geopolitical tensions.
With increasing international instability, the maritime transport sector, as well as global supply chains, will need to develop new strategies to face these challenges and mitigate the potential economic damages that a major regional war could cause.
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