Middle East conflict chokes end of supply chain as lights go out in the Pacific

This article is published in association with United Nations.

For Pacific Island countries, the Middle East crisis is not a distant geopolitical event. It is already showing up in higher fuel prices, electricity uncertainty and fears that communities sitting at the far end of global supply chains could be pushed into deeper economic insecurity.

“We are at the end of the supply chain,” Tuya Altangerel, a senior UN Development Programme (UNDP) official in the Pacific region, told UN News “so this energy crisis is really impacting our communities.”

With Fiji a significant hub in the Pacific Ocean, island nations that surround it extend thousands of miles into the world’s largest ocean, with the distance between some islands as much 3,000 miles.

Within this vast area, the isolation from the rest of the world is not only very challenging by also expensive. 

From Fiji to Tuvalu, the Solomon Islands to the Marshall Islands, governments are moving to conserve fuel, protect families and the most vulnerable and keep essential services running. 

UN Photo/Eskinder Debebe

The impact of the crisis in the Middle East is being felt in Kiribati (pictured) and other Pacific nations.

The immediate concern is not only whether ships keep moving, but how quickly oil price spikes, freight costs and fuel-market disruptions in Asia ripple across some of the world’s most remote and import-dependent communities.

Why Strait of Hormuz matters

The Strait of Hormuz, which has largely been blocked for the last month, is a critical to global supply chains, with the waterway carrying around 20 per cent of the global seaborne oil and gas trade.

For the Pacific, the main risk is that energy disruption in the Strait drives up fuel prices, bunker costs and freight rates across Asia-Pacific supply chains.

That matters because Pacific small island communities shipping links are concentrated in Asia-Pacific markets. It is through those fuel and pricing channels that distant conflict can hit islands thousands of miles away.

Fragile shipping links, high transport costs

Maritime transport is the lifeline of Pacific Small Island Developing States (SIDS) but they have some of the weakest shipping connectivity in the world, according to UN trade and development agency (UNCTAD).

Pacific islands have much few direct connections, which means food, fuels and shipments are not received directly, but are moved from ship to ship which raises the price. 

Pacific SIDS also receive very few container ship port calls, with some countries only receiving 40 to 50 shipments per year. 

That weak connectivity matters because it translates directly into higher costs, particularly for fuel that comes from outside the region and requires ‘middleman’ fees for shipments to be transferred at ports abroad.

SIDS paid twice as much for international transport of imports as developed countries in 2022, according to the UN. 

For countries at the edge of the system, that means little room to absorb new disruption. 

Oil dependence raises the stakes

The region’s exposure is amplified by its dependence on imported fossil fuels. 

Transport consumes around 70 per cent of total fuel imported in the Pacific region, with sea transport the main fuel user in some countries. 

That dependence leaves Pacific countries acutely vulnerable to any turmoil affecting global oil and gas flows, especially through Asian markets that supply or refine fuel for the region.

Meanwhile, many countries rely nearly entirely on fuel. “Tuvalu is definitely at the end of the supply chain and more than 90 per cent of its energy comes from diesel fuel,” Ms. Altangerel said. 

She added that UNDP is looking at “solarization of the entire island” as part of the longer-term response, stressing that the current shock underlines the urgency of reducing reliance on imported diesel.

Governments move to contain the fallout

Across the Pacific, UNDP said governments are already activating emergency measures.

In Fiji, the Government has warned citizens against panic buying and hoarding amid sharp rises in fuel prices.

As the supply chain continues to other Pacific nations from Fiji which is a regional fuel distribution hub, the impacts are even starker. Tuvalu announced a state of emergency on 14 April. The Marshall Islands has declared a 90-day economic emergency. 

The Solomon Islands government said the country held between 40 and 50 days of fuel in-country.

Vanuatu has warned of electricity price rises, while Palau, Nauru and Kiribati are also weighing responses.

Communities feeling the strain

For households, the crisis is very real with many communities already seeing blackouts and service instability.

In Tuvalu, “we understood that already the communities are experiencing daily blackouts,” Ms Altangerel said.

© BRANTV

People in Vanuatu in the southwestern Pacific install solar panels on a roof.

She added that blackouts are also affecting parts of Fiji, even though it is among the Pacific’s larger and relatively better-prepared economies. 

These challenges are being compounded by recent cyclones that passed by Fiji and the Solomon Islands.

Chokepoint

But the UNDP official warned that the bigger test may still lie ahead if prices rise further in May and beyond.

“The last thing that we want is because of this energy crisis that’s happening around the world, this critical work stops,” she said.

Speaking about Tuvalu’s Coastal Adaption Plan’s, which seeks to protect the island from rising sea levels, she said “it will definitely impact this important work that we doing.” 

For Pacific Island countries, the message is stark: what begins as a crisis in a distant shipping chokepoint can quickly become a crisis of affordability and power supply, disconnecting vulnerable island communities from the rest of the world and alleviating their risk to climate pressures from rising sea levels and extreme weather events.