From oil routes to high streets: conflict threatens Britain’s supply lifeline

It may feel distant, but the Middle East conflict is already working its way into the day-to-day reality of UK businesses. From rising fuel costs to delayed shipments and tightening supplies, the disruption is rippling through global supply chains with real consequences at home. For small and micro firms in particular, the impact isn’t theoretical—it’s immediate, squeezing margins, stretching cashflow and putting already fragile trading conditions under even greater strain.

Photo by Howei Wang on Unsplash

Across the UK, businesses of every size, from micro‑firms to major manufacturers, are increasingly worried about the impact of the Middle East conflict on their supply chains. Even while the ceasefire holds and even if peace talks succeed, these concerns are well‑founded. The region is a critical hub for global energy, commodities, and shipping routes, and the conflict is already causing significant disruption. The longer conflict or uncertainty drag on the more significant that disruption will be. Even when things have settled down the tap can’t be turned back on immediately. It will take time for supply chains to return to ‘normal’.

Modern supply chains are global, interconnected, and time‑sensitive. A disruption in one region can ripple across the world quickly. Disruptions are affecting global inventories. S&P Global research shows that shortages could hit industries such as electronics, automotive, packaging, and agriculture.

Flights have been cancelled, and shipping routes are facing delays and higher costs. These bottlenecks slow down deliveries, increase costs, and reduce reliability. The IMF has warned the world economy could be “thrown off course” as commodity prices rise and supply chains tighten. It has also forecast the UK to be the worst hit of the world’s advanced economies.

A weaker global economy reduces demand, investment, and confidence, all of which affect UK businesses. That impact could knock UK Growth, which, while it seems to be holding up given today’s data (16th April 26) showing a 0.5% growth in February, is likely to make a poorer showing next month when the stats relate to the period when the Middle East conflict started.

Supply chains are networks of people, companies, resources, and transport routes that put food and household goods on supermarket shelves and materials into factories. They involve everyone producing and delivering goods from raw materials at one end of the chain, through production and manufacturing to transport and logistics, warehouses and distribution to retailers and customers at the other end. If one link breaks it can bring the whole chain to a halt.

The Middle East Conflict is a major disrupter because the Strait of Hormuz is a global choke point. It’s one of the world’s most important shipping routes. It carries a fifth of global petroleum liquids, a quarter of global seaborne oil trade and a fifth of global LNG (liquefied natural gas).

The conflict has led to blocked or restricted shipping lanes and led to higher insurance premiums, rerouted ships and delays and shortages. This immediately affects fuel, energy‑intensive industries, and transport costs. Fuel and energy affect every part of industry and prices for oil, gas, fertilisers and petrochemicals have been pushed up.

Brent crude rose 25% in early March 2026, while European gas futures jumped 56% over the same period. Those price increases feed directly into everything else we buy.

The Middle East conflict is not a distant geopolitical issue. It is a direct threat to global supply chains, and therefore to UK businesses of all sizes and the wider economy. Concerns for small and micro businesses include higher costs, material shortages, delayed shipments, disruption to their contracts, inflation. They lack the buffers of larger firms, and the impact can be immediate and severe.

How This Impacts Businesses, Especially Small and Micro Firms

1. Higher costs across the board

Businesses face rising costs for:

• Fuel

• Raw materials

• Packaging

• Transport

• Energy

These increases are already visible in freight markets and supplier pricing.

Small businesses with tight margins feel this most acutely.

2. Delays and shortages

As inventories deplete, shortages of key materials become more likely. S&P Global warns that shortages could affect entire sectors. For example, helium shortages could disrupt 25% of Taiwan’s electronics output.

For UK firms, this means:

• Longer lead times

• Difficulty fulfilling orders

• Reduced production capacity

3. Cash‑flow pressure

Longer lead times and higher input costs mean:

• More cash tied up in stock

• Higher working‑capital requirements

• Greater financial strain

Small businesses often lack the reserves to absorb these shocks.

4. Contractual and operational risks

Companies are already issuing force majeure notices which are legal declarations that they cannot fulfil contracts due to extraordinary events. These are spreading beyond the conflict zone into Asia.

This creates:

• Contract disputes

• Lost revenue

• Supply uncertainty

5. Reduced economic confidence

With the IMF warning of slower global growth and higher inflation, businesses may:

• Delay investment

• Reduce hiring

• Scale back expansion plans

This slows economic activity across the UK.

What This Means for the UK Economy

1. Inflationary pressure

Higher energy and commodity prices feed directly into inflation. The IMF expects global inflation to rise to 4.4%, up 0.6 points from earlier forecasts.

2. Slower growth

The IMF has cut its 2026 global growth forecast from 3.3% to 3.1%, with further downside risks if the conflict persists.

3. Risk to food security and prices

Fertilizer prices have surged, urea up 83.9% year‑on‑year, due to blocked shipments through Hormuz. This will eventually push up food prices, affecting households and hospitality businesses.

4. Manufacturing disruption

Shortages of plastics, chemicals, and metals threaten production in:

• Automotive

• Electronics

• Packaging

• Pharmaceuticals

These sectors are major UK employers and exporters.

Businesses Are Right to Be Concerned and for small and micro businesses, which don’t have the resources of larger firms to act as a safety net, the impact can be immediate and severe.