From Hormuz to New Trade Routes: What's Changing?

**Tim Elliott** (0:00)
This is the Morning Drive. With tensions around the Strait of Hormuz putting global trade routes under scrutiny, gold businesses are looking at new ways to keep goods moving from the UAE Oman cargo corridors, and also for Jira as an important trade route, supply chain resilience is becoming more important than ever. Joining us to talk this through is Dr. Fabienne Chedid, Assistant Professor in Operations Management and Logistics at Heriot-Watt University in Dubai.
Dr. Fabienne, good to have you on the program.

**Fabienne Chedid** (0:36)
Thank you, Tim, for having me this morning.

**Tim Elliott** (0:38)
You're very welcome. Can we start with sort of the big picture? Are we witnessing a permanent, you know, change in direction, a pivot, as they call it, in how goods enter and exit the Gulf? Or is it just a temporary kind of tactical adjustment?
Which are we looking at at the moment?

**Fabienne Chedid** (0:56)
Yeah, I mean, this is a very important topic now, and we are seeing, you know, a significant exposure, you know, because the Strait of Hormuz is a very critical gateway for exports with around 20% of global oil trade passing through it. What we're seeing today in Gulf businesses that they are investing much more in resilience through alternative channels, and they are no longer, you know, focusing only on having, you know, the cheapest supply chain or the most cost efficient supply chain. It's more about building, you know, supply chains and networks that can survive long-term impact and surviving the disruption and quickly recover from it. So I would say, in my opinion, that the Gulf countries are much better prepared now than they were a decade ago. So we are seeing lots of investments in new ports, logistic infrastructure, alternative routes, connectivity in the region that will reduce some of that vulnerability. So the region is becoming absolutely much more resilient now.

**Tim Elliott** (2:01)
I want to talk to you in some more detail. Resilience is a word that's going to come up a few times, I think, in our conversation this morning. The thing is, the Strait of Hormuz, it remains a key concern when it comes to global trade. And I wonder if you can quantify or put into context just how exposed the Gulf businesses are to any disruption in the corridor right now.

**Fabienne Chedid** (2:29)
The exposure remains significant now. I mean, and only the exposure is not only the energy market, but we're seeing also disruption related to increasing shipping costs, the transit times, the business confidence. So we are seeing, you know, lots of impacts. However, you know, as I mentioned to you, the region is no longer entirely dependent on a single route. So we are seeing some changes, as you said, a transition to, you know, a resilience as a strategic priority.
We are also seeing, you know, those alternative routes moving from being only, you know, emergency solution, short term solutions, to becoming more strategic assets, permanent assets for businesses and the region in general.

**Tim Elliott** (3:17)
The headline has been all about diversification of routes of late. We've heard a great deal about the Yue-Yaman, the new Shahjah-Yaman cargo route. That's cut transit times from three months to just over a month. The strategic rise of Fujairah as a bypass as well. Do you think this signals a long-term shift in how goods move around the region?

**Fabienne Chedid** (3:47)
I believe it does. I believe businesses are recognizing that relying on a single route will create more and more risks. The Charjah-Yaman corridor demonstrates how the alternative route can reduce transit times, can increase flexibility and reduce the impact of that risk.
I think that even when tensions ease, the companies are likely to continue diversifying their routes, because resilience is becoming more and more critical. So from a regional perspective, I think these developments are going to strengthen the economy integration across the GCC and would reinforce the UAE position as a logistic hub, as a hub for transport and import and export. So investment in those boards and the multimodal network, and this infrastructure will create a more connected supply chain, especially in this region and particularly the UAE.

**Tim Elliott** (4:48)
Let's take the business viewpoint. Do you think that businesses are becoming maybe more willing to prioritize resilience over efficiency, even if it means higher operating costs?

**Fabienne Chedid** (5:04)
Yeah, I think this is one of the biggest shifts we're seeing now in supply chain management. Resilience 20 years ago was just a buzzword, but now companies are really investing and prioritizing it, even if it means that this is going to be extra cost for them.
We're seeing that they are trying to balance the efficiency with resilience, having extra inventory, diversifying suppliers, having more redundant suppliers, using multiple transport routes. So even if this may cost more in the short term, but it will definitely reduce the risk of major disruptions in the long term. So they are recognizing now that resilience is not only long-term planning, but it is more a proactive approach before the disruption happening. So we are seeing that businesses are moving from what we used to call unsupplied chain management just in time, to what we are now seeing just in case thinking.