The Strait of Hormuz is a geopolitical chokepoint — and a critical reminder of why advanced supply chain planning is non-negotiable. In this Supply Chain Byte, Lisa Anderson highlights the ripple effects that disruptions in this narrow strait can cause and how strategic planning, risk assessment and scenario modeling help companies stay ahead.

The Israel-Iran war highlighted the importance of supply chain chokepoints. Iran threatened to shut down the Strat of Hormuz. This strait is a narrow waterway located between the Persian Gulf and the Gulf of Oman, bordered by Iran, Oman and the UAE. 20% of global petroleum production flows through this strait which equates to $1 billion daily. It doesn’t make a lot of sense because it would cut off Iran’s oil exports; however, it would impact the global supply of oil. 84% of the oil and 83% of liquified natural gas goes to Asia/ China with 50% going to China. 

Oil and natural gas are vital to the world as energy powers manufacturers, distributors, goods movement, and AI. The future of the economy will depend on AI, and therefore energy. The good news for the U.S. is that only 3% of the petroleum that flows through the Strait of Hormuz supports the U.S., and the U.S. has become the largest producer in the world and is at peak production. Thus, the U.S. can support its energy needs; however, the needs are growing at an aggressive rate with the advent of AI and you cannot ramp up production rapidly. In addition, the world’s supply greatly impacts the price of oil. Thus, the Strait of Hormuz can have an important impact on supply and the economy. 

The successful companies are utilizing advanced planning strategies. For example, SIOP (Sales Inventory Operations Planning) and predictive demand and supply planning models will stay ahead of changing conditions, evaluate alternatives and optimize your plans. Advanced planning systems powered by AI will predict disruptions, evaluate changing conditions, and optimize production, material, supply, and transportation plans to serve customers and mitigate costs and risks.  

Proactive and forward-thinking companies will ensure they monitor key global events that impact their business, including their end-to-end supply chain. If you’re not planning around global chokepoints, you’re gambling with resilience. In addition, they will think ahead about changing business conditions such as the ramp up with AI and what they should do to ensure they are positioned for success. The forward-thinking, resilient, and innovative will thrive and secure their positions in the marketplace for decades to come. 

If you are interested in reading more on this topic:
Resilience in Supply Chain of Paramount Importance