The Future of Transportation Projects After the Israel-Iran War

The twelve-day war between Israel and Iran caused increased market volatility due to its brevity and limited scale, resulting in losses for several transportation companies. However, the war did not significantly impact the development trajectory of global logistics projects. The main trends remain unchanged, writes Grigory Mikhailov.

Three months have passed since the end of the twelve-day war between Israel and Iran. The conflict in the Middle East exposed several vulnerabilities in global logistics and sparked renewed interest in its development prospects.

The Strait of Hormuz and Alternatives

In the context of global logistics, the fate of the Strait of Hormuz drew the most attention during the military conflict. Approximately 20 percent of the world's oil and more than 30 percent of liquefied gas pass through this strait. Two-thirds of the oil transported through the strait is purchased by China, India, Japan, and South Korea.

Iranian authorities have repeatedly declared the possibility of blocking the strait in the event of a military threat. In June 2025, this statement was reiterated by Esmail Kosari, the head of the Iranian Parliament's Committee on National Security and Foreign Policy.

According to JPMorgan analysts, if a blockade were implemented, oil prices could soar to $130 per barrel, while the Iranian Ministry of Foreign Affairs offered more radical estimates—up to $300.

A blockade could affect the interests of major players. Iran understands this and has been using this issue as leverage against its opponents since at least 1980. However, Iran did not follow through on this threat during the war and is unlikely to do so later.
Attempting a blockade would be akin to Iran shooting itself in the foot. Such a move would provoke a sharp negative reaction from both energy resource buyers and Iran's neighbors who profit from oil and gas exports—Saudi Arabia, UAE, Kuwait, Bahrain, and Qatar. For the latter three countries, the Strait of Hormuz is the only route for energy exports.

Three countries in the region have focused on establishing alternative export routes. Iran built the Goreh-Jask pipeline (1 million barrels per day, though only partially utilized), Saudi Arabia constructed the "East-West" pipeline (4.2 million barrels), and the UAE built the Abu Dhabi-Fujairah pipeline (1.5 million barrels).

During the war, most tankers left the strait, and freight rates increased. After the strikes ended, the situation in the strait and neighboring countries stabilized. Shipping is at full capacity now.


The Bab el-Mandeb Strait

This strategic waterway represents a major vulnerability in global shipping networks. Connecting the Red Sea to the Gulf of Aden, the strait serves as a vital maritime passage for international cargo movement, linking Europe, Asia, and East Africa.

Houthi attacks in the Red Sea have been ongoing for several years. Both military and commercial vessels have been targeted. A significant portion of carriers prefer not to take risks and deliver cargo via alternative routes—around the Cape of Good Hope. Traffic through the Suez has decreased by more than 60 percent. The most recent attacks on vessels occurred on July 6 and 7. The bulk carrier Magic Seas and the cargo ship Eternity C sank. The Houthis' actions are damaging the Israeli economy—delivery costs are rising, and cargo turnover at the Israeli port of Eilat has decreased by 85 percent. Attempts by several Western countries to resolve the problem through military means have been unsuccessful.

No significant changes in the situation occurred after the end of the war.


The North-South International Transport Corridor

This transport corridor connects Russia, the Caucasus, and Central Asia with Iran. Several experts feared that military actions would lead to massive destruction and paralysis of transit transportation through Iran. The actual consequences proved to be considerably milder—there were disruptions in transportation schedules, but nothing more. There is no information about significant damage to Iranian infrastructure involved in the transport corridor's operations.

The current situation with the North-South ITC is as follows: the route is in its development stage. Progress is moving at an unhurried pace.

Of the three routes—the western (passing through the Caucasus), the central (directly across the Caspian Sea), and the eastern (through Kazakhstan and Turkmenistan)—the latter is developing most dynamically and consistently. Investments are gradually flowing in, and infrastructure is being modernized. This process is proceeding without excessive politicization. For Russian industrialists operating in the Urals and Siberia, the eastern route is the most understandable and convenient.
The condition of railway infrastructure in the countries through which the route passes differs significantly. While Russia has double-track electrified railways, Iran has single-track non-electrified sections with considerably lower throughput capacity than in the Russian Federation.

The slow pace of modernization of Caspian ports, including the ports of Makhachkala and Olya, impedes the development of the central route.

The situation is exacerbated by the continuing shallowing of the Caspian Sea. At present, the water level has reached a historic low. This complicates operations at the ports of Astrakhan, Aktau, Olya, and Kuryk.

Information is emerging about plans to abandon dredging work in the 188-kilometer Volga-Caspian Canal, even though these operations were previously positioned as part of the North-South corridor development project. Meanwhile, Roshydromet forecasts that the Caspian shallowing situation will not improve in the next 10-15 years.

Some experts considered the western route of the ITC, passing through Azerbaijan, to be the most promising. In recent months, the future of this direction has become questionable—reflecting the cooling of Russian-Azerbaijani relations. Possible increased presence of Great Britain, the United States, and Turkey in this territory creates an additional risk.

Following the end of military actions, there was speculation that Iranian authorities, having felt the vulnerability of sea routes, would finally decide to give serious momentum to the implementation of the North-South ITC project promptly and in full. At present, there are no signs that Iran has decided to accelerate the implementation of the ITC project. The issue of constructing the problematic Rasht-Astara section, connecting Azerbaijan with Iran, remains unresolved.

I should note that the belief common among Russian experts that Iranian officials and businessmen support integration with Russia is not entirely accurate. Iranian elites are not monolithic; among local elites, there are also those who sympathize with the West. This noticeably affects the speed and effectiveness of decisions regarding the project.

There is also good news: momentum for the corridor's development was provided by the free trade agreement between the EAEU states and Iran, which came into force on May 15, 2025.


Central Asia

Military actions in the Persian Gulf caused concern among transporters in Central Asian countries. As with the North-South corridor, specialists feared a complete paralysis of the Iranian transport system. These fears did not materialize. The war has ended, and cargo continues to move.

However, even if a negative scenario had materialized, the economies of Central Asian countries would not have suffered major damage—the main cargo flows to and from the region travel along other routes, through Russia, China, and the Caucasus.

It would seem that the escalation of the situation in Iran could have increased cargo shippers’ interest in alternative projects in the southern direction, such as the Trans-Afghan railway project (Russia, Uzbekistan, Afghanistan, Pakistan). This has not been the case so far. One reason is the security risks in implementing the project in Afghanistan and Pakistan, countries that regularly face terrorist threats.

Several sources report that the conflict between Israel and Iran has led to increased Chinese activity in the region. It is claimed that against the backdrop of military actions, Beijing became convinced of the vulnerability of energy supplies through the Strait of Hormuz and decided to accelerate the implementation of logistics projects connecting China with Iran through Central Asia. These include, for example, the China-Kyrgyzstan-Uzbekistan railway. Changes are being made on the fly to the project already agreed upon by the parties, which should increase the capacity of the future railway.

An alternative option on the table is the construction of another branch: China (Kashgar)-Tajikistan-Uzbekistan. This information has not been proved on the official level.

To summarize: the twelve-day war between Israel and Iran, due to its brevity and limited scale, caused increased market volatility, and several transport companies incurred losses. At the same time, the war did not have a serious impact on the development dynamics of logistics projects worldwide.
The main trends remain the unchanged:

Fragmentation of international trade, regionalization, reorientation of supply chains
Growth in the share of container transportation
Personnel shortages, loss of competencies, degradation of several key companies and industrial sectors in a number of Western countries
Digitalization/automation, implementation of autonomous vehicles, growing cyber threats


Source: https://ru.valdaiclub.com/