Thai firms advised to brace for energy, freight price hikes as Hormuz risk returns

Businesses are being urged to monitor geopolitical risks closely and review their inventory management as tensions in the Strait of Hormuz threaten to flare up again, raising renewed concerns over volatile energy and logistics costs.

Poj Aramwattananont, chairman of the Thai Chamber of Commerce (TCC) and the Board of Trade of Thailand, stated today that the situation in the Middle East remains highly volatile. Renewed friction between the United States and Iran has emerged, despite the two sides signing a ceasefire memorandum of understanding (MoU) on June 17.

“The resurging tension could disrupt maritime transport through the Middle East, leading to fluctuations in freight rates and insurance premiums, while potentially driving up energy prices and causing raw material shortages,” Poj warned.

Shipping line representatives indicate that they have prepared for the instability by rerouting vessels. Cargo is now being diverted to alternative ports, such as Khor Fakkan in the United Arab Emirates and Salalah and Sohar in Oman.

While shipping lines continue to assess the risks, very few vessels are currently transiting the strait. Poj advised operators not to panic, but urged them to stay vigilant due to the rapidly changing nature of the situation.

To mitigate risks, the TCC recommends that businesses continuously monitor logistics costs and energy prices, maintain sufficient buffer stocks of raw materials and formulate backup supply chain plans. Companies should also coordinate closely with shipping lines to secure the most cost-effective shipping routes.

“The chamber stands ready to gather feedback from affected members and coordinate with public and private agencies to maintain trade confidence and energy security, building on its previous collaboration with the government's Middle East conflict monitoring centre,” Poj added.

Meanwhile, Pimjai Leeissaranukul, chairperson of the Federation of Thai Industries (FTI), noted that the fresh round of US-Iran friction has already triggered global energy market volatility.

Brent crude prices surged over 19%, from below US$70 per barrel earlier this month to $83.30, underscoring the severe impact of geopolitical risks on the industrial sector.

Despite these challenges, the FTI expressed confidence in the government’s capacity to handle energy price fluctuations. The administration possesses the necessary tools and experience to cushion the impact on the public by stabilising consumer goods prices and inflation, Pimjai claimed.

She added that government intervention is crucial to preventing rising energy costs from burdening households and businesses, particularly small and medium-sized enterprises (SMEs), allowing them to sustain operations and retain workers, while propping up domestic consumption amidst global economic uncertainty.