What is happening in the transport industry is a reflection of the war in the Middle East, specifically the Ormuz Strait blockade, which has caused turmoil in global fuel markets. Recall that before the war in Iran, this route carried about 20% of the world's oil demand and nearly 30% of LNG.
Data released by the Central Statistical Office shows that sentiment in the transport and warehousing sectors is worsening. The data indicates a 4.4-point decline in the business climate, the largest drop since 2022, when Russia launched a full-scale attack on Ukraine.
Transport industry in a bind
The changes in global fuel markets hit the transport sector hard. While some companies have gained resilience and skills from the events of 2022 and 2020, when global transport was paralyzed by the COVID-19 pandemic, current price increases, though significantly raising operating costs, are being met with efforts to counter them.
These effects could soon heavily impact passenger transport, as ticket price changes are straightforward. The situation is different for other transport, especially when companies are bound to maintain prices through long-term freight contracts. In such cases, changing the freight rate can be difficult or even impossible.
And that is not the only issue. While transport firms are dealing with immediate challenges, their future looks much more complicated. Why? The Middle East situation, particularly what will happen when peace is achieved between Iran, the United States, and Israel, also plays a role. Even if this happens in the coming days or weeks, the effects of the past two months will be felt for a long time. Companies transporting oil through the Ormuz Strait may need many months to return to pre-war levels. Additionally, time will be needed to repair infrastructure damaged by Iranian attacks and to replenish global raw material stocks. All of this will mean that high fuel prices will not disappear with the conflict’s end and may persist long after peace is achieved.
Will transport companies disappear?
The problems faced by transport firms look similar across Europe. In Germany, the situation appears dramatic. Not only are transport costs high, but companies are also struggling to find workers. Estimates suggest that up to 120,000 drivers could be missing along the Rhine.
Problems also exist in other EU countries. In Italy, transport companies began losing financial liquidity. Increasingly, it is said that transport enterprises, while not going bankrupt, will gradually withdraw from the market by taking fewer orders, allowing for a gradual sale of vehicles. This could enable a business closure without declaring bankruptcy, avoiding the financial consequences that might otherwise arise.
These events could lead to a situation where, in a few months, the transport industry—once one of the fastest-growing in Europe—may become dysfunctional, potentially causing major economic problems and rising transport costs across the Old Continent.
See also: Increasing difficulties in air communication. The problem will not only be higher prices
