Market Update: Korean SMEs strangled by Iran war chokehold on key shipping routes – Full Analysis

 

Korea’s small and mid-sized exporters, often least equipped to absorb shocks, are grappling with delays and rising costs as the Iran war chokes off key shipping routes.

 

The disruption, driven by the U.S. and Israel’s war against Iran that has effectively halted vessel traffic through the Strait of Hormuz — the only sea route out of the Persian Gulf — and nearby ports, has quickly spilled into export operations, leaving cargo stranded and supply chains strained.

 


 

Over just two weeks, the strain has surfaced in a surge of complaints from businesses. From March 3 to 17, companies filed 523 cases of difficulties linked to the Middle East crisis with government agencies and trade groups, according to the Ministry of SMEs and Startups, the Korea Trade-Investment Promotion Agency and the Korea International Trade Association (KITA). That amounts to more than 30 cases a day. Representatives said the impact has largely fallen on smaller exporters.

 

Nearly half of the reported problems — 253 cases — involve logistics disruptions. The bottleneck reflects a broader paralysis across ports in six Persian Gulf countries, where operations have slowed or stopped and vessels have struggled to secure safe passage. As of Thursday, only nine of 24 major ports, or 37.5 percent, were operating normally.

 

The remaining 15 ports, or 62.5 percent, are located inside the Strait of Hormuz and are operating under restrictions or have suspended operations. Traffic through the critical trade corridor has dropped sharply after Iran effectively closed the strait through military threat and attacks.

 

This handout photo taken on March 11 and released by the Royal Thai Navy shows smoke rising from the Thai bulk carrier ‘Mayuree Naree’ near the Strait of Hormuz after an attack. [AFP/YONHAP]

 

Shipping costs have risen just as quickly. Global carriers have imposed steep war-related surcharges, pushing container rates on Middle East routes — typically around $2,000 — to nearly three times their usual levels. Additional fees tied to conflict risks have added $3,000 to $4,000 per container, compounding the burden on exporters already facing delays.

 

“The recent rise in freight and other logistics costs is likely to hurt the competitiveness of Korea’s manufacturing and exports,” the Korea Ocean Business Corporation said. “Past cases suggest it could take more than twice as long as the disruption itself for conditions to fully normalize.”  

 

For many companies, the disruption has left shipments in limbo.

 

One textile exporter said cargo sent to Dubai’s Jebel Ali Port in February has remained stranded at sea for weeks, unable to dock or reroute.  

 

“The shipment scheduled for March 9 was canceled altogether as the carrier suspended Middle East routes,” the exporter said. “Our goods remain stuck in storage, and additional costs like warehousing fees keep piling up with no end in sight.”

 

Others face even more complex challenges. A logistics firm transporting chemical materials to Iran has been unable to arrange a return shipment after losing contact with its buyer, who has reportedly fled the country. With port operations disrupted and paperwork stalled, even retrieving goods has become difficult.

 

An LPG gas tanker at anchor as traffic is down in the Strait of Hormuz, amid the U.S.-Israeli conflict with Iran, in Shinas, Oman, on March 11. [REUTERS/YONHAP]

 

Industry representatives warn that the longer the conflict continues, the more severe the strain will become.

 

“The most critical variable is how long the conflict lasts,” said Han Jae-wan, head of logistics services at KITA. “Even if companies turn to alternatives like rerouting or air freight, the costs are too high, making negative margins unavoidable. Delays in shipments also push back payments, deepening uncertainty for already cash-strapped small and mid-sized firms.”

 

The ripple effects could extend well beyond exporters. A report released Thursday by the Korea Institute for Industrial Economics and Trade estimated that if the disruption persists for more than three months, production costs in Korea’s manufacturing sector could rise by 11.8 percent.

 

The report warned that prolonged interruptions in the flow of raw materials — many of which pass through Middle Eastern routes — could amplify the economic impact beyond initial projections.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY KIM SU-MIN, AHN HYO-SEONG [[email protected]]