Ronald Spahr
Managing Director

At International Cargo Express, we know that the current headlines are creating understandable concern for many Australian businesses. What is happening in other countries is not just a political game. It is already affecting global trade and local supply chains.

Two major flashpoints are now dominating global trade discussions: the escalating conflict in the Middle East, particularly around the Strait of Hormuz, and the ongoing, unpredictable U.S.-China tariff situation. Adding further complexity, significant disruptions in Gulf-region air cargo routes are emerging. Here is what it means for Australian importers and exporters.

Strait of Hormuz: Oil Chokepoint in the Crosshairs

The Strait of Hormuz carries about 20% of the world’s oil. It has become a key area of conflict because of rising tensions between Israel and Iran. While no direct attacks on commercial vessels have occurred to date, Iran’s parliament has openly discussed the possibility of closing the Strait, a scenario that would immediately spike oil prices and send shockwaves through global freight markets.

Even during the Iran-Iraq Tanker War in the 1980s, commercial shipping through Hormuz was never entirely halted. The presence of the U.S. Fifth Fleet continues to act as a stabilising force. However, the growing risk of electronic interference, rising bunker fuel costs, and insurance surcharges are already flowing through to global shipping costs.

For Australian businesses, this means rising freight rates may occur even in the absence of any physical disruption. Oil prices recently jumped from USD $69 to $74 a barrel in a single day, cost increases that quickly flow downstream into bunker surcharges applied to freight bills.

Gulf Flight Suspensions: Air Freight Feeling the Pinch

The Middle East tensions are also hitting air freight capacity. Several Gulf Cooperation Council (GCC) countries have announced extensive suspensions of both passenger and air freight services. Qatar Airways Cargo, Gulf Air, Oman Air, Jazeera Airways, and others have cancelled or rerouted flights servicing key destinations including Iran, Iraq, Syria, Jordan, and Lebanon.

Although Australia may not rely heavily on these lanes directly, many global air freight routes transit through Gulf hubs such as Doha, Muscat and Dubai. With these disruptions, capacity is tightening, flight times are extending, and rates for time-sensitive goods (including electronics, pharma, and perishables) are already under pressure. For importers moving just-in-time or high-value inventory, these constraints could very quickly impact costs and timelines.

U.S.–China Tariffs: The Indirect Hit on Aussie Shippers

The ongoing trade disputes between the U.S. and China continue to create unpredictable downstream effects on Australia’s trade lanes.

Initially, the surge in container volumes from China to the U.S.—driven by exporters front-loading cargo ahead of anticipated August tariff hikes—pulled vessels and container equipment away from Australian routes. With transpacific rates reaching up to USD $10,000 per container, shipping lines naturally prioritised the more profitable U.S. lanes.

However, the China–Australia trade lane has since entered a very different, highly unstable pricing cycle. In June, carriers attempted to push rates to USD $800/$1600 per 20GP/40HQ expecting strong demand. But, actual cargo volumes remained weaker than anticipated, especially toward late June, triggering aggressive undercutting as carriers scrambled to fill space.

Some shipping lines are already offering deeply discounted rates via e-commerce platforms and daily spot deals to forwarders. With a wave of large vessels (6,000 to 9,000 TEU) scheduled to arrive for July sailings, overcapacity is once again building. Unless capacity is withdrawn through additional blank sailings, the price war is likely to continue.

At present, only one blank sailing has been confirmed for early July, indicating that unless more capacity is withdrawn, aggressive discounting may persist until true peak season demand kicks in from August.

What Australian Shippers Can Do

Despite the uncertainty, there are steps that Australian businesses can take to manage risk and maintain resilience in their supply chains:

1. Diversify Suppliers

Sourcing materials from multiple countries can reduce dependency on a single region affected by tariffs. Now is the time to actively explore sourcing alternatives in Southeast Asia, Europe or Latin America. While unit prices may be slightly higher, greater stability in freight rates and schedules could ultimately prove more cost-effective.

2. Beware of landed costings

Especially important is to ensure your landed costings have been calculated accurately for financial success. Without proper planning or awareness of potential charges, the costs can quickly increase and erode expected profit margins.

3. Reevaluate Product Designs (if applicable)

Adjusting product designs to use tariff-free or lower-tariff materials from countries with favourable trade agreements can help manage costs. This not only reduces tariff exposure but can also lead to innovation and improved product offerings. Our custom brokerage team can offer guidance on navigating tariff classifications and identifying cost-effective alternatives.

4. Build Rate Buffers into Pricing

Avoid pricing your products based on temporary market lows. Consider adopting quarterly or annual average freight rate benchmarks to smooth volatility in your product pricing models.

5. Secure Space Early

Do not wait for the expected peak season crunch. Lock in capacity and rates now for the second half of the year while current overcapacity provides a window of opportunity.

6. Consider Multi-Modal Options

For time-sensitive goods, explore partial air-sea solutions via Asia. These can help restore reliability with a controlled cost increase, particularly for high-turnover consumer goods and perishables.

7. Negotiate with Suppliers or Increase Inventory

Collaborating with suppliers to share costs or adjust payment terms can help absorb tariff impact, such as negotiating longer payment terms or bulk discounts with its suppliers. Stocking up on inventory before tariff changes take effect can also help avoid higher costs. Our experts can provide insights into optimal inventory levels and timing.

Bottom Line

At International Cargo Express, our role is to stay ahead of these developments and proactively support our clients through volatile global markets. The global trade environment may be turbulent, but with careful planning, diversified sourcing, and strong partnerships, Australian businesses can continue to navigate these challenges successfully.

If you have questions, require updated rate guidance, or would like a tailored supply chain review, our team is here to assist.