Turning supply chain volatility into regional advantage

Recent geopolitical developments have once again placed the Middle East at the center of global economic attention. Immediate attention has focused on energy markets, shipping routes, and rising business costs. For business leaders and policymakers, the more important question is how the Middle East will use this moment to become more connected, more resilient, and more competitive over the long term.

The Strait of Hormuz alone carries around a quarter of global seaborne oil trade, alongside significant volumes of liquefied natural gas and fertilizers. This reinforces why disruptions in the region can quickly move beyond energy markets and affect wider supply chains, food systems and industrial production.

Global supply chains are no longer being assessed only on cost efficiency. Companies are increasingly asking whether their supply chains can withstand shocks, reroute flows, maintain access to critical inputs, and protect continuity of supply. In this environment, resilience is becoming a source of competitive advantage.

The Middle East is well-positioned for this shift. The region sits at the intersection of Asia, Europe, and Africa with significant capital, expanding transport infrastructure, major ports, industrial zones, energy resources, and national agendas focused on economic diversification. If connected more deliberately, these assets can strengthen the region’s position as a more integrated and resilient trade hub, helping businesses manage uncertainty and access multiple markets.

A new lens on regional strength

The current environment has highlighted a clear lesson: concentration creates vulnerability. By May 2025, tonnage through the Suez Canal remained around 70 percent below 2023 levels, as vessels continued to avoid Red Sea routes and rerouted through longer alternatives. Disruption in one corridor reshapes trade flows, increases transit times, and raises costs across global supply chains.

When trade flows depend heavily on a limited number of shipping routes, ports, suppliers, or markets, disruptions can quickly create ripple effects across industries and geographies, particularly for sectors that rely on energy, food, industrial inputs, consumer goods, construction materials, and critical components. Ports, airports, industrial cities, free zones, rail networks, and land corridors can operate as a more connected regional system, giving businesses greater flexibility.

The objective is not to replace existing global trade routes but to create greater optionality to absorb shocks more effectively, redirect flows more quickly, and provide companies with a more reliable base for regional and international operations.

Regional integration as an economic hedge

One of the most important opportunities is deeper regional integration. The Middle East has strong trade potential, but intra-regional flows remain below what the region’s geography, capital base, and market size could support. Periods of disruption can create the urgency needed to address this gap.

Exports of goods and services account for around 41.7 percent of GDP across the Middle East and North Africa, while imports account for 36.6 percent. The opportunity lies in making that trade base more regionally connected, more diversified and less dependent on a limited number of corridors.

Greater integration can be pursued commercially and operationally through improved customs coordination, harmonized standards, digitized border processes, stronger multimodal connectivity, and alternative land-based trade routes. Infrastructure, logistics efficiency, and cross-border processes often determine how effectively trade agreements work in practice.

As trade corridors evolve, links between the Gulf, the Levant, Turkiye, Europe, Africa and Asia may become more important for businesses seeking alternative routes and more diversified market access. In this sense, regional integration can act as an economic hedge by reducing reliance on single corridors, creating new channels for trade and investment, and strengthening the Middle East’s collective ability to respond to external shocks.

From supply chain efficiency to optionality

The current environment is affecting companies far beyond logistics and shipping delays, with pressure increasingly extending into financing, insurance, inventory planning and customer pricing. Recent IMF analysis has also highlighted energy prices, supply chains, and financial markets as the main channels through which the current conflict is affecting economies, with impacts varying across countries. 

The next phase of supply chain strategy will require optionality. Companies need a clear understanding of where they are vulnerable, which suppliers or routes are critical, how quickly they can switch logistics channels, and what level of inventory or local capacity is required to maintain continuity.

This does not mean abandoning efficiency. It means balancing efficiency with resilience through stronger supplier networks, alternative transport routes and better visibility across supply chains. 

Role of governments and institutions

Governments also play a critical role. Supply chain resilience depends not only on companies but also on infrastructure, policy coordination, and institutional readiness. Continued disruption in the Red Sea and vessels avoiding the Suez Canal have underscored how tightly linked logistics networks, ports, customs authorities, and private sector operators are.

Across the Middle East, countries are already investing heavily in ports, logistics zones, railways, industrial clusters, and digital government platforms. This is particularly relevant as countries across the region seek to diversify their economies and attract investment into manufacturing, logistics, food security, mining, tourism, construction and advanced industries. 

The next step is to connect these investments more effectively, leveraging stronger public-private collaboration. This is particularly important for sectors such as food, energy, healthcare, construction, industrial inputs, and technology-enabled infrastructure, where resilience is directly linked to economic stability, investment confidence, and national readiness.

The current environment is a reminder that global trade will remain exposed to geopolitical, financial and operational shocks. The question is not whether disruption will happen again, but how effectively economies and businesses are prepared to respond when it does. For the Middle East, the priority now is less about reacting to volatility and more about using this period to strengthen regional coordination, trade resilience and long-term economic connectivity.

• Omar Al-Halabi is partner and head of Economics and Public Policy Advisory at KPMG Middle East.