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Supply chain horizon scanning: Strait of Hormuz related issues should be monitored

If Iran follows through on its threat to close the Strait of Hormuz it would have a major impact on global supply chains.

INSIGHT, Inc., an international provider of supply chain planning solutions, warns that substantial supply chain problems will result if Iran follows through on its threat to close the Strait of Hormuz. Between 20 and 30 percent of the world’s oil supply passes through the Strait on a daily basis and any closure would have a direct impact on global oil markets, as well as severe knock-on consequences for the whole supply chain.

Iran threatened last week to stop the flow of oil through the Strait of Hormuz if foreign sanctions were imposed on its crude exports because of its nuclear ambitions; a move that would almost certainly trigger military conflict, says INSIGHT. Many analysts believe that such threats are baseless and that closing the Strait would be economically and politically damaging for Iran. Not only would relations with the West be impacted but also relations with powerful regional powers, such as Saudi Arabia and the UAE. Nevertheless, recent Iranian military activity in the area, a test of a new missile, and warnings to the US Navy that its carriers must stay out of the Gulf, have ratcheted up tensions significantly.

“The last thing that the world's fragile economy needs is a new confrontation in the Middle East,” said Dr. Jeff Karrenbauer, president of INSIGHT. “In the last week, we have seen tensions increase dramatically between Iran and the West. Open conflict in the Strait of Hormuz would be a nightmare for supply chains throughout the world, raising the cost of raw materials, manufacturing, transportation, warehousing and inventory: essentially every component of a supply chain.”

http://www.insightoutsmart.com

•Date: 10th January 2012 • World/Middle East •Type: Article • Topic: Enterprise risk management

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