Global Supply Chains in an Era of Geopolitical Uncertainty
Written by Anjali John (Research Leader), Arsh Singh (Research Lead), Harini Bhagavathula, Jack Kargel, Ayaan Pasha
EXECUTIVE SUMMARY:
Commercial vessel and oil transportation through the Strait of Hormuz has “decreased”, as there have been an increased use of unmonitored dark crossings, making tracking shipped volumes difficult.
Taiwan dominates the advanced semiconductor manufacturing, making the tech supply chain vulnerable.
The United States-China tensions have driven the push for domestic U.S. chip production
Conflicts in the Ukraine-Russia War have caused changes in their agricultural trade, energy transformation, and use of critical minerals due to wartime shortages and shipping route changes.
Introduction
The global supply chain has experienced various shocks in recent times due to global geopolitical risks. Geopolitical risks can be defined as the potential for political events, international friction, policy changes, or conflicts to disrupt the global market. Tensions in the Strait of Hormuz and Bab al-Mandeb, the AI Ecosystem in Taiwan and China, and the Ukraine-Russia war have put a strain on systematic supply chain processes. As these disruptions have dampened the regular supply chain processes, countries and companies have had to adapt to the changes to get necessary goods to consumers worldwide.
The Strait of Hormuz and Bab al-Mandeb
The Strait of Hormuz and the Bab al-Mandeb are two of the most important maritime chokepoints in global supply chains. They are critical transportation routes for oil, energy products, and commercial goods. According to the (Council on Foreign Relations (CFR), global trade is heavily concentrated through a limited number of waterways, leaving supply chains vulnerable to geopolitical tensions if faced with geopolitical tensions. These routes are typically designed and used for transportation efficiency, and alternative routes are often limited or less effective when conflicts rise. Recent tensions between Iran and the United States, alongside Houthi-related security threats in Yemen, have exposed these vulnerabilities in the Strait of Hormuz and Bab al-Mandeb.
The effects of these geopolitical tensions are especially prominent in the Strait of Hormuz. Since the conflict escalated in February 2026, commercial vessel traffic has declined a considerable amount. According to (Reuters), only four vessels crossed the Strait on September 15th, 2026, compared to the seven that crossed the day prior. These abnormally low figures demonstrate how substantial of an impact geopolitical tensions have on the movement of commercial vessels, even when global demand for the commodities being transported remains elevated.
Oil transportation through Hormuz has also been disrupted. However, determining the exact amount of oil that has been moving through the strait has become increasingly difficult. In September 2026, (Reuters) reported that shipping analytics company (Vortexa) estimated that approximately 8 million barrels of crude oil and other refined petroleum products were passing through Hormuz on a seven-day moving average. Data from (IMF PortWatch) similarly shows a sharp decline in tracked ship arrivals through the Strait of Hormuz during 2026 compared to prior-year levels (Figure 1).
The decline in tracked ship arrivals shown in Figure 1 may be greater than the actual decline in vessel traffic through Hormuz. One of the main reasons for this uncertainty is the growing usage of “dark crossings”. This occurs when vessels disable their Automatic Identification System (AIS) transponders and become more difficult to track. The (International Energy Agency (IEA)) warns that vessels operating without AIS signals can cause observed shipping volumes to underestimate the actual traffic in the strait.
The Bab al-Mandeb represents another vulnerability within global supply chains. This waterway provides an important shipping route between Asian and European markets through the Suez Canal. In September 2026, (Al Jazeera) reported that Houthi forces seized the Red Sea port city of Mocha, which expanded their control around Bab al-Mandeb. This location is particularly important because greater control of Yemen’s Red Sea coastline gives the Houthis more ability to interfere with commercial shipping near the strait. Although Houthi officials stated that international trade through Bab al-Mandeb remained safe and uninterrupted, their ban on Saudi ships remained in place. These events demonstrate how regional conflicts can create uncertainty for vessels that are using major international trade routes.
Overall, the current disruptions surrounding the Strait of Hormuz and Bab al-Mandeb demonstrate how geopolitical conflicts can extend beyond their immediate regions and end up interfering with global supply chains. As seen through reduced vessel traffic, uncertain oil flows through dark crossings, and increased security risks, conflicts happening around these chokepoints can make the movement of important goods unpredictable, highlighting the vulnerability created when global supply chains depend heavily on a small number of maritime routes.
The AI Ecosystem in Taiwan and China
China considers Taiwan as a part of its territory and has used various forms of force such as cyberattacks and military activity to asset control over the island. In 2025, Taiwan was ranked as the 22nd largest economy in the world, where the island operates under a very trade-dependent economy with exports accounting for about 70% of its total GDP (Congressional Research Service). This continued economic growth can be linked towards the rise of AI, with Taiwan’s economy growing over 14% in 2026, while the dollar value of its technology exports increased by 65% (Domino Theory). With this continued growth, the United States has become one of Taiwan's top international partners, shown through their January 2026 trade agreement where Taiwan agreed to invest at least $250 billion dollars to build and expand advanced semiconductor production and innovation in exchange for lower tariff rates (Department of Commerce). Taiwan's concentration on the chip can be connected directly to the US-China rivalry, where U.S. imports from Taiwan have roughly doubled since 2022, reaching about $200 billion in 2025 (Figure 2).
These exports between the US and Taiwan not only aim to promote chip innovation and production, but also to limit Chinese access to advanced AI technologies. Beijing is taking measures to prevent this through tighter rules on chip technology (AEI). This has made Taiwan the central issue in the United States-China tech rivarly as Bloomberg Economics estimates show that if there were a conflict over Taiwan, chip supply issues would result in China’s GDP falling about 11% and the U.S.’s GDP to fall by about 6.6% in just the first year (Bloomberg Economics). Taiwan is the center of a global supply chain, meaning that a conflict could cause supply chain disruptions for both China and the US.
Taiwan’s strategic importance is mainly driven by its dominance in the semiconductor manufacturing market. Taiwan Semiconductor Manufacturing Company (TSMC) produces most of the world’s advanced chips, which are essential for AI, smartphones, automotive systems, and other defense technologies. This concentration of production creates a heightened sense of supply chain vulnerability, as alternative manufacturers can’t immediately match Taiwan’s production capacity. Any conflict or blockade could cause semiconductor shortages, resulting in production delays and increased costs across multiple global industries.
In response to China’s technological growth, the United States has introduced export controls, that restrict China’s access to advanced AI chips, semiconductor manufacturing equipment, and other related technologies. These measures were implemented to limit China’s ability to develop advanced computing capabilities for military applications (U.S. Bureau of Industry and Security). However, these same restrictions and regulations complicate global sourcing, as companies in the U.S. and across the globe must consider regulatory compliance alongside traditional supply chain factors such as cost, quality, and delivery time. Consequently, geopolitical tensions can disrupt supply chains even without direct military conflict.
To reduce dependence on overseas manufacturing, the U.S. has recently focused on encouraging domestic semiconductor production through various congressional initiatives such as (CHIPS and Science Act of 2022). In March 2025, TSMC announced a $100 billion investment in U.S. semiconductor manufacturing, bringing its total U.S. investment to $165 billion (TSMC). While these investments support domestic production and geographic diversification, new facilities require substantial capital, specialized expertise, and months to reach full capacity. Figure 3 shows U.S. electronics production rising to its highest level since 1992, although the employment levels continue to remain stagnant within the industry (FRED). Therefore, U.S. manufacturing expansion may reduce long-term dependence on Taiwan’s production, but it can’t eliminate short-term supply chain vulnerabilities.
The Ukraine-Russia War Tensions
Russia's invasion of Ukraine in February 2022 has had major consequences for international trade, particularly in the movement of agricultural commodities, energy, and critical minerals. Both countries play important roles in supplying these resources to global markets, making conflict significant for industries and economies far beyond Eastern Europe (World Bank Group). As the war continues, disruptions to established trade routes and production facilities have forced countries to reconsider where they obtain essential commodities and how those commodities are transported.
The Black Sea has historically served as a crucial export corridor for Russian and Ukrainian agricultural commodities, particularly wheat, corn, sunflower oil and oilseeds. Following the initial naval blockade of Ukrainian ports in 2022, the United Nations and Turkey facilitated the Black Sea Grain Initiative, allowing agricultural shipments to resume. However, Russia’s withdrawal from the agreement in July 2023 renewed uncertainty surrounding maritime exports. Soon after, Ukraine established an independent maritime corridor in August 2023, restoring access to international markets despite the continuing conflict (European Commission).
Although the alternative corridor enabled trade to recover, continued military attacks throughout 2026 have demonstrated its continued vulnerability. According to Reuteurs, attacks on ports and commercial vessels intensified during July, with Ukraine's Ministry of Infrastructure recording 35 attacks on vessels in port, 22 at sea, and 67 on port facilities. The escalation interrupted grain-terminal operations and forced exporters to delay or cancel scheduled cargo loadings during the peak agricultural export season (El Safty & Thukral).
The scale of the disruption is reflected in changes to Ukraine's export transportation routes. Approximately 80% of Ukrainian exports of grain, oilseeds, and related products moved through Black Sea ports in July 2026, compared with 20% through the EU–Ukraine Solidarity Lanes (European Commission). By August, Black Sea ports accounted for approximately 10%, while the Solidarity Lanes handled 90% (European Commission). These alternative corridors connect Ukraine to European markets through railways, roads, and inland waterways. The figures represent the proportion of agricultural exports transported through each network, rather than changes in total export tonnage. Nevertheless, the magnitude of the redistribution demonstrates the extent to which Ukrainian exporters shifted away from established maritime infrastructure in recent times.
Russian exporters have also redirected shipments. Nearly 90% of Russia’s seaborne grain exports previously passed through the Black Sea but after repeated disruptions, operators adapted fertilizer and coal terminals in Ust-Luga, St. Petersburg, and Murmansk for grain handling (Mikkelsen). Russian grain exports in July–August 2026 were reportedly 31% lower than a year earlier, while constrained Baltic handling capacity limited the speed of diversification (Stolyarov & Popova). In October, the USDA cut its 2026/27 Russian wheat export forecast from 43 million to 40 million metric tons, citing restricted access to Black Sea and Sea of Azov ports (USDA).
Rerouting imposes measurable trade costs. Freight rates from Ukrainian Danube ports to Egypt increased from approximately $30 per metric ton in July to around $105 in September; congestion at the Sulina Canal extended vessel queues beyond two weeks. A journey previously completed in about 12 days could take over a month (Polityuk). Supply-chain adjustment was visible in buyers’ choices, too. For example, after one 20,000-ton shipment of Russian sunflower oil to India was canceled and another 60,000 tons were delayed, Indian importers ordered 150,000 tons of palm oil amid supply uncertainty and seasonal demand (Jadhav). Palm oil can substitute sunflower oil in foods, so disruptions to one commodity can shift purchasing toward another.
Another major consequence of the war has been the transformation of Europe's energy supply network. Before the invasion, Russia was one of the European Union's largest natural gas suppliers, providing more than 150 billion cubic meters in 2021. However, following the outbreak of the war and efforts to reduce dependence on Russian energy, imports declined to approximately 36 billion cubic meters by 2025. During the same period, natural gas imports from the United States increased from 18.9 to 75.6 billion cubic meters, while Norwegian supplies rose from 79.5 to 89.3 billion (European Council). Figure 4 illustrates how Europe's reliance on Russian natural gas has declined as alternative suppliers have taken on a greater share.
Accommodating these changes requires major investments in energy infrastructure. Europe has expanded its liquefied natural gas (LNG) terminals, allowing more gas to be imported by ship rather than through pipelines connected to Russia. According to the International Energy Agency, LNG import capacity in Central and Eastern Europe increased by approximately 15 billion cubic meters annually between late 2021 and 2025 (Molnar). However, limited pipeline connections between coastal terminals and inland markets continue to create transportation challenges. The European Union has also introduced legislation to phase out remaining Russian gas imports, with restrictions on long-term LNG and pipeline contracts scheduled to take effect during 2027 (Council of the European Union).
The Russia–Ukraine war has also disrupted Ukraine's production of critical minerals used in aerospace, defense, batteries, and advanced manufacturing. Ukraine accounted for approximately 3.1% of global ilmenite production in 2024, a mineral primarily used to produce titanium. Ukrainian producer Velta manufactured approximately 97,000 metric tons of ilmenite concentrate, only 60% of its planned output, partly because of electricity shortages. Graphite production also declined by 46% to approximately 900 metric tons, while the Zavalievskiy Graphite Complex suspended operations amid rising energy costs and logistical difficulties (USGS).
Ukraine's mineral resources have also attracted international investment as countries seek to diversify strategic material supplies. In January 2026, the Ukrainian government selected a consortium to develop the Dobra lithium deposit, with a minimum planned investment of $179 million (Cabinet of Ministers of Ukraine). However, Russian occupation of resource-rich territories, damaged infrastructure, and limited domestic processing capacity continue to restrict commercial development (International Trade Administration).
Overall, agricultural exporters have faced rising transportation costs and shifting trade routes, while European countries have reorganized their energy imports and invested in alternative infrastructure. At the same time, disruptions to Ukraine's mineral industry have complicated access to strategically important materials. These developments demonstrate how prolonged geopolitical conflict can reshape established trading relationships and global supply networks.
Conclusion
Geopolitical issues may differ in context and cause, but they all share the capability of disrupting supply chains. With falling traffic and shipments through the Strait of Hormuz below normal, increasing tensions between China and Taiwan threaten the supply and production of advanced chips as the United States continues to invest into the domestic production, and the attacks on Black Sea ports pushing Ukrainian grain onto land routes at much higher freight cost. To handle geopolitical risks, businesses must evaluate supply chain efficiency, while focusing on resilience to find an adequate balance. Supply Chain leaders must understand this disruption as ongoing issues and conditions, rather than rare events as though there is no way to eliminate all risk; selective measures can produce more resilient supply chains.
Comments