Tariffs & Global Shipping Volatility: What Shippers Should Expect Next

Oil prices are rising as the conflict in the Persian Gulf region intensifies and the waterways in the area face disruption, contributing to growing concerns over tariffs and global shipping volatility. The address by United States President Donald Trump on April 1 did not immediately alleviate fears that the conflict would escalate. At the time of this writing, an American fighter jet was downed over Iranian airspace. [Editor’s Note: The crew was eventually successfully rescued.] The future course of actions by the U.S. is also not clear. At a minimum, we can expect strong retaliatory actions by the U.S.

The economic uncertainty from the attack on Iran by the U.S. and Israel, followed by the counterattacks by Iran, are expected for several months. The uncertainty has remained in place for the past 12 months since the U.S. unilaterally imposed tariffs on many nations on April 2, 2025.

While the U.S. is self-sufficient in oil and is not directly impacted by the constriction of the Strait of Hormuz, because 20% of the world’s oil and gas flows through the strait, the indirect impact on the U.S. and direct impact on other nations are both significant. The combined effect of sanctions, constriction of waterways and damage to infrastructure — real or threatened — reduce the amount of shipping in the region, while causing energy supplies to tighten worldwide. Even a small perturbation in crude oil prices can reverberate through much of the world economy in significant ways.

As this article is written, crude oil futures are trading more than 50% higher than they were a month ago. This impacts gas and diesel prices at the pump in the U.S. Gas prices are above $4 and diesel above $5.50 on average in the U.S. Amazon has begun adding a 3.5% fuel surcharge to cover the rising fuel and related logistics costs. Diesel-powered boats that fish the New England waters will have to pass on the rising fuel prices to their customers, resulting in more expensive seafood and reduced supplies. For example, if there is a reduction in the longfin squid caught by fishermen in Rhode Island, calamari prices will go up sharply in restaurants amid lower availability.

India imports 90% of its liquid petroleum gas (LPG) from the United Arab Emirates and neighboring countries that pass through the Strait of Hormuz. A majority of the restaurants and households there rely on LPG for cooking. One-third of the world’s supply of liquid helium passes through the Strait of Hormuz, and its supply is severely impacted. Helium is transported in liquid form at very cold temperatures in containers. Many are waiting to be transported. Helium is used in the rocket space, semiconductor and medical imaging industries, and a sustained war in the middle east and Russia could impact the production and prices of semiconductor-based devices we use every day.

Petroleum-based products such as fertilizers, plastics, paints, medical devices and scores of products large and small will see a sharp uptick in prices. Although inflation in the U.S. has come down from its peak of 9.1% in June 2022 to 3%, it is persistent and well above the 2% rate preferred by the Federal Reserve.

Higher gasoline and diesel prices significantly impact travel by cars and planes. Electricity costs will go up for households even if the power plants generating electricity are not using oil or gas. Higher levels of inflation impact the purchase of essential items such as food and medicine.

All these factors have the effect of reducing the disposable income among households, causing consumers to spend less. If consumption is diminished, global demand growth can suffer, not just for petroleum-based products, but all consumer goods. The increased price of oil also means Russia has the monetary resources to continue its war in Ukraine, further threatening supplies and stability worldwide.

Until the war, the Strait of Hormuz had free passage for cargo ships. Now, Iran is demanding and collecting a premium for safe passage of ships from countries such as Japan and others. Iran and Oman are drafting a protocol to supervise cargo transport through the Strait. These actions undermine unimpeded shipping that was promised under the United Nations Convention on the Law of the Sea. Even if agreements are reached for safe passage of container ships, the risk premium for shippers will increase further, adding to the logistical costs for shippers.

Businesses were able to absorb some of the increase in costs induced by the tariffs. Tariffs and rising fuel prices across the agriculture, construction, manufacturing, logistics and service sectors have increased operating expenses and reduced margins. Investment decisions by businesses, especially mid-sized companies, have been put on hold. The uncertainty surrounding energy prices will further delay investment decisions.

Until the end of the first quarter of 2025, emerging and developed economies were poised for high levels of growth, even with the continued invasion and occupation of Ukraine by Russia. For example, the growth of the Indian economy was expected to exceed 8%. Tariffs and war in the Middle East have severely diminished those prospects. Inflation could creep back to 2022 levels, and without a resolution to the conflicts, the risk of a global recession is heightened.

In practical terms, what does it mean for households and businesses? In the short term, we can expect higher prices at gasoline stations and for heating oil and aviation fares. Household energy bills may rise, and price-sensitive shoppers could see elevated costs for everyday goods, especially those with high energy inputs or long supply chains.

In the medium term, businesses may adjust procurement strategies, seek hedging opportunities, diversify suppliers or make changes in inventory management. Households might anticipate shifting commuting patterns or travel plans as costs fluctuate.

The long-term implications are difficult to predict; recurrent energy-price shocks can accelerate investments in energy efficiency, renewable energy adoption and electrification of transport. Firms that successfully manage energy risk may gain competitive advantages, while those with high exposure to energy costs may need to restructure to maintain profitability.

A note on uncertainty and risk management: Predicting exact price trajectories in geopolitically fraught environments is inherently uncertain. Factors such as international diplomacy, supply discipline by major producers, the pace of demand growth and technological shifts in energy affect outcomes in unpredictable ways.

For policymakers and market participants, robust risk management involves scenario planning, diversified energy sourcing, strategic reserves and transparent communication to stabilize expectations. Monitoring indicators such as shipping lane security, refinery naphtha and gasoline spreads, as well as inventory levels, provides a fuller picture of near-term risks.