Key Takeaways
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Escalating Middle East conflict is disrupting global supply chains, with constrained transit through the Strait of Hormuz and reduced war risk insurance driving operational and financial risk.
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Artificial intelligence (AI) tools in procurement and logistics enhance efficiency but may expose companies to risk when geopolitical factors are absent from scenario modeling and planning assumptions.
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Proactive supply chain strategies — including supplier diversification, contingency routing and contract review — strengthen resilience across procurement, inventory management and logistics planning.
Escalating conflict in the Middle East is once again placing pressure on global supply chains, particularly in critical transit corridors, such as the Strait of Hormuz. Reports of slowed shipping activity and reduced availability of war risk insurance are creating immediate operational and financial implications for companies reliant on the region.
For manufacturers and distributors, the challenge is not only responding to disruption but anticipating it.
Many companies have increasingly integrated artificial intelligence (AI) and automation into procurement, inventory management and logistics planning. These tools can enhance efficiency and support decision-making; however, their effectiveness is dependent on the assumptions and scenarios built into their models. If geopolitical risks are not adequately incorporated, companies may be operating with an incomplete view of potential exposure.
From our vantage point, working with clients across the manufacturing and distribution sector, a key consideration is how AI-driven strategies are being informed. Companies that proactively incorporate geopolitical risk factors into their planning — whether through scenario modeling, supplier diversification or contingency routing — are often better positioned to respond to disruption. Conversely, those relying on static or historically driven models may find their strategies lagging behind rapidly evolving conditions.
This is particularly relevant in areas, such as:
- Procurement strategy: Evaluating alternative sourcing options and supplier concentration risk.
- Inventory management: Balancing optimization with resilience in the face of potential delays or obsolescence.
- Logistics planning: Assessing alternative transportation routes and methods, including cost and timing trade-offs.
- Contractual considerations: Revisiting agreements to account for volatility and shifting regulatory environments.
While AI can support these processes, it does not replace the need for informed judgment. Companies must evaluate whether their systems are equipped to account for emerging risks — or whether additional strategic input is required.
As global events continue to evolve at a rapid pace, flexibility and forward-looking planning remain critical. This environment presents an opportunity for companies to reassess their current strategies and consult with their advisors to better understand the financial, operational and risk implications of potential supply chain disruptions.
We Can Help
PKF O’Connor Davies’ experience across the manufacturing and distribution landscape provides insight into how companies are navigating these challenges in real time. Leveraging both industry knowledge and a broad client perspective, we help businesses evaluate risks, strengthen planning and make more informed decisions in an increasingly complex global environment.
Contact Us
If you have any questions, please contact your PKF O’Connor Davies client service team or:
James Beobide, CPA
Director
jbeobide@pkfod.com
George Whitehead, CPA
Partner
Commercial Practice Co-Leader
gwhitehead@pkfod.com