GENEVA — Geopolitical conflicts are prompting businesses worldwide to rethink how they source products and transport goods, with changes to established supply chains potentially lasting beyond current crises, according to World Trade Organization Director-General Ngozi Okonjo-Iweala.
Speaking to Reuters on Thursday during the annual meetings of the International Monetary Fund and World Bank, Okonjo-Iweala said the wars in Ukraine and the Middle East could have long-term effects on international trade. Businesses that have adopted alternative shipping routes to avoid disruptions may continue using them even after the conflicts ease.
The war involving Iran has contributed to a steep decline in trade across the Middle East. WTO projections show that exports from the region could fall by 17% this year, while imports are expected to decrease by about 15%.
Private-sector experts expect trade to recover once the war ends and the Strait of Hormuz reopens. Nevertheless, companies are increasingly evaluating the risks of depending on a small number of suppliers or transportation routes.
Okonjo-Iweala said recurring disruptions have underscored the need for businesses and governments to strengthen contingency planning and diversify their supply chains. Although alternative routes may cost more, companies could continue relying on them to reduce their vulnerability to future crises.
She also noted that trade disruptions extend beyond the Middle East, pointing to the extensive tariffs introduced by US President Donald Trump.
Companies have been making substantial adjustments to their supply chains in response to geopolitical uncertainty, Okonjo-Iweala said. Businesses have shown they can identify alternative ways to move goods, although those options may involve higher expenses.
She emphasized the need to safeguard access to essential transportation infrastructure and other strategic assets. Disruptions at major chokepoints, she warned, can have consequences for the broader international trading system.
Expanding trade within individual regions could also help countries limit their exposure to global shocks. Okonjo-Iweala highlighted the potential for African economies to increase commerce among countries on the continent.
Trade between African nations currently represents approximately 20% of the continent’s overall trade. By comparison, trade within the European Union accounts for about 60%.
Increasing regional commerce could generate economic value and create jobs, she said. Regional trade agreements are also expected to make further progress, even as trade conducted under WTO rules continues to represent nearly three-quarters of global trade.
The WTO recently revised its forecast for global merchandise trade volume growth in 2026 to 3.9%, up from the baseline estimate of 1.9% released in March.
Strong demand for AI-related products has helped improve the outlook, counterbalancing some of the negative effects of intensifying conflict in the Middle East. However, Okonjo-Iweala cautioned that the higher forecast should not be taken as a sign that every segment of international trade is performing well.
She warned that the influence of AI-related demand was obscuring less favorable developments elsewhere in global trade. Significant uncertainty remains amid continuing conflicts, tariffs and questions over the sustainability of the current AI boom.
For businesses, the improved headline growth projection does not remove the challenges created by geopolitical instability. Diversifying suppliers, reviewing shipping routes and preparing for potential disruptions are becoming increasingly important as companies adapt to an unpredictable global trading environment.
Original article
Comments