Marine Chokepoints and Supply Chains: What's at Risk?

Key insights

80% of the world's trade by volume travels by sea, but disruptions to shipping lanes cost around USD10.7 billion a year.
The closure at the Strait of Hormuz that began in early 2026 demonstrates just how vulnerable critical marine shipping lanes are.
Extreme weather, geopolitical tension and other risks present threats to other chokepoints, including the Taiwan Strait, the Strait of Malacca and the Panama Canal.
A chokepoint bottleneck can cause a ripple effect across supply chains, disrupting trade flows and driving up the cost of goods.

The world's shipping lanes are critically important to global commerce, with over 80% of trade by volume traveling by sea. While the challenges of marine chokepoints have long been understood, the closure of the Strait of Hormuz has demonstrated how these vulnerabilities can impact the global economy.

According to analysis from the University of Oxford, the Strait is just one of 24 strategic waterways around the world that are most important to global trade. Blockages in these narrow yet vital waterways can disrupt trade flows and drive up the cost of goods.

Geopolitics is not the only risk to consider. Shipping chokepoints can be blocked by accidents — such as the Ever Given grounding in the Suez Canal in 2021 — or hampered by natural disasters and extreme weather events, such as droughts in the Panama Canal. All these risks are top of mind for business leaders, according to Gallagher's latest global survey.

This article presents three further scenarios for the Taiwan Strait, the Strait of Malacca and the Panama Canal. Developed by Gallagher Re in partnership with Oxford University's Environmental Change Institute (ECI), they can be used to stress test the resilience of a company's supply chains and business continuity plans.

"Marine chokepoints concentrate risk," explains Jim Hall, professor of Climate and Environmental Risk, Oxford University and a lead researcher on the collaboration with Gallagher Re. "When disruption occurs at these locations, the impacts are rarely confined to one region — they ripple through supply chains, affecting energy systems, food security, manufacturing and insurance markets. Timely, transparent data is essential for predicting the scale and duration of those effects."

Gallagher Re has partnered with the University of Oxford's Environmental Change Institute (ECI) to better understand the contingent business interruption (CBI) exposure to blockages in critical shipping lanes and how the effects of chokepoint disruptions are likely to translate into commercial insurance claims.

The Oxford team's analysis estimates that disruptions to maritime chokepoints cost the global economy around USD10.7 billion in a typical year, with trade worth up to around USD192 billion affected in various ways.¹

It's only by better anticipating and preparing for future volatility that companies can successfully build more robust and adaptable supply chains, observes Mallika Natarajan, head of Analytics Advocacy (UK) at Gallagher Re.

"Many organizations recognize that supply chain disruption is a growing risk, but few have a clear view of how a marine chokepoint event would actually impact their operations, suppliers or customers. The key challenge is translating a geopolitical or natural catastrophe scenario into a measurable business outcome. By quantifying those impacts, organizations can make better decisions around resilience, contingency planning and risk transfer."

Hormuz: A test case for the global economy

In normal conditions, around a fifth of global oil and gas supply passes through the Strait of Hormuz, and a significant portion of fertilizer products, too. Before the outbreak of the conflict in February 2026, around 130 vessels a day were transiting the waterway.² In March, this dropped to just six — and in the months since, it has recovered to only around 12 a day as of early September.³

The falloff in traffic caused one of the most significant supply disruptions in the history of the energy market, sending the price of Brent Crude oil from USD72 a barrel on February 16 to over USD100 a barrel in March, and USD97 as of early September.⁴

The cost of raw materials is well-correlated with the oil price. The graphic below illustrates the potential effects of the Strait of Hormuz disruption on the cost of US material, based on the Oxford team's work.

It suggests that during the initial three months, existing supplies of materials are drawn down, and the pricing effects are muted. But if disruption continues for longer, stockpiles are exhausted and a "tipping point" is reached after 4-5 months, leading to structural inflation pressure — just as the US hurricane season begins in earnest.

"Supply chain disruptions rarely occur in isolation," says Natarajan. "A chokepoint event can increase material costs, extend delivery times and constrain access to critical components at exactly the same time that businesses are dealing with other shocks, such as natural catastrophes or inflationary pressures. Understanding these compound impacts is essential for assessing contingent business interruption (CBI) exposure and ensuring resilience strategies remain effective under stress."

What other marine chokepoints are at risk?

The Oxford ECI's work has identified 24 significant marine chokepoints worldwide. The two most important are the Taiwan Strait and the Strait of Malacca, with around 20% of global maritime trade by value passing through each.

Around 15% of sea-trade by value passes through each of the Suez Canal, Dover Strait, Strait of Gibraltar and Bab el-Mandeb Strait, while the remaining 18 chokepoints each account for 10% or less.¹

Rerouting: A key determinant of risk

Oxford's work classifies these chokepoints into three broad groups, based on how easy it is for ships to find alternative routes if they're disrupted. This is one of the most critical factors in assessing the likely economic impact of such disruptions.

Group 1: No rerouting possible

There are four chokepoints in the highest-risk group: the Bosporus Strait in Turkey; the Strait of Hormuz; the Oresund Strait between Denmark and Sweden, of critical importance to the Baltic countries; and the Bohai Strait on the coast of Northern China.

Group 2: Long rerouting

The middle-risk group consists of six chokepoints with alternative routes that would require ships to travel more than 5,000 km out of their way if they're blocked. These six are the Suez Canal, the Panama Canal, the Bab el Mandeb Strait connecting the Red Sea to the Gulf of Aden, the Strait of Gibraltar, the Strait of Magellan at the southern tip of South America, and the Torres Strait between Australia and Papua New Guinea.

Group 3: Short rerouting

The remainder of the world's chokepoints would require vessels to reroute by less than 5,000 km. This group includes the Straits of Taiwan, Malacca, Korea and Dover.

Critical chokepoints: Three types of risk

Each of the following scenarios illustrates a particular risk that could disrupt the global flow of goods.

Scenario 1: Conflict in the Taiwan Strait (Group 3)

Around 20% of global trade by value (USD2.4 trillion) passes through the Taiwan Strait, which separates the island from the Chinese mainland. It presents one of the most-discussed sources of geopolitical risk to the global economy.

According to intelligence agencies, the near-term risk of China staging a military invasion of Taiwan is considered low. However, China has publicly expressed a long-term goal of reunification with Taiwan, often discussed in the context of 2049, the 100th anniversary of the founding of the People's Republic of China.⁵

In either scenario, the most affected sector the mining industry, followed by petrochemicals, then electrical products and machinery. Taiwan is the world's most critical semiconductor manufacturing hub. The consumer electronics, telecom, industrial automation and automotive manufacturing industries would face immediate supply disruptions, and the impact of rerouting would be felt by a wider range of industries over time.

"Taiwan's semiconductor manufacturing contributes approximately 90% of the world's top semiconductors," according to Adam Carrier, head of consulting at AnotherDay, a Gallagher business. "A conflict or blockage in the Strait would have major consequences for each of the many sectors that depend on semiconductors. This reliance is gradually decreasing in the US, but semiconductor factories take a long time to develop."

Scenario 2: Piracy in the Strait of Malacca (Group 3)

The Strait of Malacca provides a useful illustration of another common risk to global shipping: piracy. This chokepoint, which accounts for 22% of the world's maritime trade by value (annually USD2.5 trillion), has recently seen an uptick in pirate activity.

In 2025, 108 incidents of sea robbery were reported in the Straits of Malacca and Singapore. While this was the highest total since 2007, the majority were low-severity incidents in which the crew was not injured, according to the shipping industry anti-piracy group ReCAAP.⁶

Nevertheless, the financial impact of piracy in this region includes higher insurance premiums, onboard security expenditures and higher fuel costs in high-speed transit zones. The Oxford/Gallagher Re modeling indicates that piracy risk increases the annual cost of moving goods through the Strait of Malacca by approximately USD1.25 billion to USD5 billion.

Risk and finance leaders can use each of these chokepoint scenarios as a starting point for thinking about their exposure — or even a tabletop exercise to test their planned incident response.

Oxford modeled a scenario of elevated pirate activity causing a period of disruption in the Strait lasting seven days, before the international community was able to intervene and restore security through (for example) increased naval patrols. This disruption would not necessarily mean that the Strait was physically closed for seven days; rather, elevated pirate activity could cause vessels to delay or adjust course, increase security precautions and incur higher insurance costs.

Similar to the Taiwan Strait, it's the mining, petrochemicals and electrical/machinery sectors that have the greatest value of trade at risk from tensions in the Strait of Malacca. That said, many industries could experience business interruptions in this scenario. In all, this seven-day disruption scenario could affect trade worth up to USD46.6 billion, according to the modeling.

Scenario 3: Drought in the Panama Canal (Group 2)

More than USD750 billion (0.75 trillion) in trade value annually travels through the Panama Canal. The canal relies on freshwater lock-based systems that require regular rainfall to replenish watershed reservoirs. In the event of a drought, water inflows drop, the lake levels fall and the canal authority must ration water use per ship.

In 2023-2024, the region was hit by an El Niño-driven drought, reducing the available water used in the canal's system of locks. Daily transits of the canal reduced by up to 40% between November 2023 and May 2024, costing between USD1.4 billion and USD5.5 billion in higher transport times, congestion delays and rerouting, according to Oxford's analysis.

The Oxford ECI examined two sub-scenarios for drought in the Panama Canal:

A low-severity event including 7 days of disruption and increased congestion at the Ports of Colon and Balboa
A medium-severity impact event involving 6 months of disruption with trade rerouted around Cape Horn or US intermodal rail.

In the low-severity scenario, the total value of exposed trade by industry would be an estimated USD14 billion. The most exposed economic sector by far is petroleum and chemicals, followed by mining, metal products and electrical/machinery. The medium-severity scenario presents a similar sectoral profile — but here the total value of exposed trade would be an estimated USD380 billion.

In addition to business interruption, longer journey times mean greater uncertainty, higher fuel costs, and the potential for bottlenecks and vessel bunching in ports that may not be equipped to handle the uptick in volume.

The prospects for this scenario playing out in reality are far from remote. As noted above, the 2023-2024 drought event was likely spurred by the El Niño climate phenomenon — conditions that are already re-emerging in 2026.⁷

"We've officially transitioned into El Niño as of June,⁸ and the latest ENSO forecast model consensus points to further strengthening into late 2026," says Steve Bowen, chief Science officer at Gallagher Re. "There is growing expectation that this could be one of the stronger El Niño events we've seen in decades, if not longer."

Forecasters continue to monitor ENSO conditions closely, given the potential for climate patterns to contribute to drought conditions that could affect canal operations.

"The world has never been more interconnected from an economic or societal perspective, and disruptions often reveal underlying vulnerabilities in that system," says Bowen. "When a weather or climate shock occurs, it can trigger a cascade of second-order effects — from reduced canal capacity due to lower water levels, to power constraints during heatwaves, to limitations in worker productivity."

Solving for chokepoint risk: Mitigation, insurance and resilience

We need look no further than current events to see the impact of chokepoint disruption on global supply chains. The prospect of a single chokepoint disruption causing large, coordinated losses for businesses worldwide is a material concern, and these scenarios provide a strong starting point: a quantification of the value of trade at risk. But assessing the full global exposure is a more formidable challenge.

Risk and finance leaders can use each of these chokepoint scenarios as a starting point for thinking about their exposure — or even a tabletop exercise to test their planned incident response. Working with their insurance brokers, they can consider insurance and risk transfer products to help mitigate the risk.

The Gallagher Re/Oxford ECI modeling points toward the importance of a layered resilience approach. Disruptions to chokepoints with short reroutes can be buffered with inventory and emergency strategies, but chokepoints with long reroutes may warrant substitution of production sites or transport modes. The most extreme, lowest-probability disruptions are where specialist insurance products do their best work. In other words, a business's supply chain risk management strategy will depend on what chokepoint(s) it's exposed to.

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Better decisions start with better visibility.

Mallika Natarajan, head of Analytics Advocacy (UK), Gallagher Re.

According to Gallagher's Redrawing Supply Chains research, business leaders' most common approaches to this risk include diversifying their supplier bases and maintaining approved backup suppliers. Respondents also indicated that parametric and trade disruption insurance products are gaining interest for non-physical, politically triggered supply chain interruption.

Insurers and reinsurers are increasingly differentiating pricing and capacity based on how well a company documents and monitors its supply chain exposure.

Given the complexity and interconnectedness of global supply chains, insurers are still, to some extent, pricing for the unknown. Gallagher Re's work with Oxford aims to tackle that challenge head-on.

For insurers, the prospect of a single chokepoint disruption causing large, coordinated losses from businesses all over the world is a material concern. The chokepoints research provides a strong starting point: a quantification of the value of trade at risk. But assessing the full global exposure is a more formidable challenge.

"Better decisions start with better visibility," says Mallika Natarajan. "We aim to help clients move from simply recognizing supply chain risk to actively quantifying, managing and transferring it. Ultimately, greater transparency around exposure supports more resilient businesses, more informed underwriting decisions and a stronger global supply chain ecosystem."

Sources

¹Verschuur, J., et al, "Systemic Impacts of Disruptions at Maritime Chokepoints," Nature Communications, 24 Nov 2025.

²Three Months That Changed Everything, HormuzStraitMonitor.com, 28 May 2026

³ Live Dashboard, HormuzStraitMonitor.com, accessed 8 September 2026.

⁴ Brent crude price, Deutsche Börse, accessed 8 September 2026.

⁵ "2026 Annual Threat Assessment of the U.S. Intelligence Community," US Senate Select Committee on Intelligence, Mar 2026.

⁶ "132 Incidents of Piracy and Armed Robbery Reported in 2025," ReCAAP Information Sharing Centre, accessed 23 Jun 2026. PDF file.

⁷ "Drought Behind Panama Canal's 2023 Shipping Disruption 'Unlikely' Without El Niño," Carbon Brief, 1 May 2024.

⁸El Nino forms, expected to strengthen, say NOAA forecasters, National Oceanic and Atmospheric Administration, 11 June 2026.