Adapting to new paradigms in global trade

Globalization was built on the quiet assumption of frictionless trade — the idea that, due to technological advancements in logistics, freight, and shipping, geography had become somewhat of a solved problem. The emergence of the digital economy made the global village even smaller and accelerated the world to an era of unprecedented economic prosperity powered by hyper-fast commerce.

This decade — starting with the COVID-19 pandemic, the Russia-Ukraine war, the United States’ erratic tariff changes, and now the conflict around the Strait of Hormuz — has put the stability of that era into question.

The International Monetary Fund (IMF) reports that about 25% to 30% of global oil and 20% of liquefied natural gas pass through the Strait of Hormuz. The resulting disruption has seen parts of Asia, Europe, and Africa struggle with accessing the daily necessities for modern life, even at inflated prices.

“Parts of the Middle East, Africa, Asia-Pacific, and Latin America face the added strain of higher food and fertilizer prices, and tighter financial conditions. Low-income countries are especially at risk of food insecurity; some may need more external support — even as such assistance has been declining,” the IMF said.

The situation offers no acceptable alternatives. With the Gulf blocked, freight must sail around the Cape of Good Hope. For a standard Asia-to-Europe voyage, this rerouting adds as many as 14 days of transit and as much as 40% increase in fuel consumption.

In the organization’s World Economic Outlook published this April, the IMF projected global headline inflation to rise “modestly” in 2026 before resuming its decline in 2027, assuming the current conflict remains constrained in scope and duration.

“Slowdown in growth and increase in inflation are expected to be particularly pronounced in emerging market and developing economies,” the report said. “Downside risks dominate the outlook.”

The International Energy Agency (IEA) characterized the current situation as the “largest supply disruption in the history of the global oil market.” Brent crude, which began the year at a stable $65, skyrocketed to around $120 in March and has settled around $100 to $110 per barrel.

This has created acute pressure in energy-dependent industries and markets unheard of in recent history. For instance, refined fuel markets like jet fuel have seen prices decoupled from crude. In Singapore, jet fuel has jumped 140% to about $230 per barrel, while European jet fuel traded at nearly double the price of crude, reflecting severe supply shortages.

Manufacturing is also being heavily impacted, as the crisis has constrained the supply of helium, an element crucial for semiconductor manufacturing. According to an article published by the World Economic Forum, the war has already taken roughly one-third of the world’s helium supply off the market, following a disruption at the massive Ras Laffan energy hub.

Yet, one of the biggest shocks resulting from the crisis is that experienced by the agriculture sector. The Gulf is a global supplier of ammonia and urea, and as much as 30% of the world’s fertilizers pass through the Strait of Hormuz, according to the UN Food and Agriculture Organization. Prices for urea have already increased by more than 30%.

A Strategic Reset for Businesses

Emerging economies like the Philippines are disproportionately at risk. Many countries in Asia rely on the Middle East for its crude imports, fertilizer, and manufacturing components.

“People in low-income developing countries are most at risk when prices rise because food accounts for about 43% of consumption on average, compared with 25% in emerging market economies and 12% in advanced economies,” the IMF said. “That makes any spike in fertilizer and food prices not just an economic problem but a socio-political one, especially where fiscal resources to cushion the blow are limited.”

For Philippine companies and regional players, this moment demands a reevaluation of former strategies to create new ones that reprioritize risk management while sustaining growth amid uncertainty.

For many corporate boardrooms, the “Just-in-Time” philosophy of trade logistics — the hallmark of 20th-century efficiency — has been discarded as a dangerous liability. Thomson Reuters Institute found in their 2026 Global Trade Report that 68% of trade professionals now rank supply chain reliability as their top strategic priority, almost double from 35% just a year ago.

Companies are now aggressively building stock of critical components by as much as three to six months in advance in warehouses, as opposed to keeping their inventory moving. Guaranteed availability is becoming more appealing than lower storage costs.

Because the volatility of fuel and war-risk insurance for transits near high-risk areas, the traditional annual freight contracts have also become obsolete. In its place, companies have developed a system of dynamic indexing, recalculating freight rates every 15 days, tied to real-time bunker fuel indices and artificial intelligence-driven risk assessments.

Meanwhile, the reliance on long, vulnerable maritime routes has led to a massive geographic reallocation of capital. Companies are now explicitly accepting a 15%-20% increase in unit costs in exchange for the security premium of “near-shoring” or “friendshoring” in a politically aligned, geographically accessible neighbor like Mexico, Vietnam, and Poland.

For the best possible results, however, the IMF advised both public and private sectors work together to find solutions to the current crisis.

“Such complex spillovers confront us at a time when many economies have limited room to absorb shocks. Many countries were already facing record-high debt levels, raising concerns about fiscal sustainability,” the organization said.

“To manage the shock and maintain resilience, it is therefore more important than ever that countries adopt appropriate policies. Measures need to be carefully calibrated to country-specific needs. Countries with limited reserves and little fiscal room to maneuver should be especially cautious.”

The world is rapidly undergoing a geopolitical and economic reconfiguration, the likes of which has not been seen since the Cold War. Such a transformation will be painful, expensive, and chaotic. But for the resilient, it offers a chance to build a more robust, if more expensive, world. — Bjorn Biel M. Beltran