Hormuz uncertainty pushes landed costs up to 50%, raising risk of higher consumer prices

Disruptions around the Strait of Hormuz are rapidly turning a shipping problem into a wider cost challenge for Indian businesses, with significantly higher freight rates, war-risk charges, and rising raw material costs beginning to permeate supply chains.

Logistics industry officials The Economic Times Digital spoke to say the increase in landed costs, which include item price, shipping fees, customs, taxes, and charges for insurance and risk, can vary from 35 to 50% on some trade lanes, with extreme cases exceeding 200% after the recurring tension around Hormuz.

The impact differs depending on destination, cargo value, and shipping route. However, as companies increasingly include clauses allowing them to pass on exceptional logistics costs, a growing share of the burden has begun to trickle down to end consumers.


Jitendra Srivastava, CEO of Triton Logistics & Maritime, says freight rates to the Gulf on some routes have climbed to $3,400-$4,000 from $300-$400 before the latest disruption. Emergency and war-related surcharges are being added over and above base freight rates.

“Maximum burden is going to [fall on] customers. Landed cost is continuously increasing. Depending on the destination, the increase in landed costs could range from 35% to 50%, and in some cases, it could be more than 200%,” he says.

The increase is particularly severe on Gulf routes. Srivastava says that putting a single percentage on the increase becomes difficult when freight itself has moved from around $400 to $4,000. Europe has also seen a sharp increase. Rates that were earlier around $700-800 have climbed to roughly $4,500-$6,500 for several shipments, he says.

Kaushik Datta Sharma, CEO-Liner Division, Parekh Global, points to a similar escalation. “Freight to Jeddah that was around $600-700 earlier has climbed to about $3,000, while Europe rates have risen from roughly $1,000 to around $4,000. On some of the US and European movements, rates for a 20-foot container have reached around $6,000 compared with $1,000-$1,100 earlier,” he says.

The increase is even sharper for some refrigerated cargo. Rates for 40-foot reefer containers, which were around $2,000-$3,000 earlier, have reached $7,000-$10,000, says Sharma.

While the exact landed-cost impact varies with the value of the cargo inside a container, Sharma estimates that logistics costs, which typically account for around 13-15% of cargo value, have risen to 25-30% or more in several cases.

“Shipping line is a carrier only. They are not the owner of the goods,” he says, explaining that freight is generally determined by container type and route rather than the value of the goods inside it. This means the percentage impact on landed cost can differ substantially between a container carrying low-value goods and one carrying higher-value products.


From freight shocks to consumer prices

The pressure is no longer confined to transportation. Disruptions to energy and petrochemical supplies are creating a second layer of cost increases across Indian manufacturing.

Chandrachur Datta, Partner at Vector Consulting Group, says disruption to crude oil, LNG, and petrochemical feedstocks is constraining CNG and PNG availability across industrial value chains. According to him, force majeure declarations by Gulf producers have disrupted around 47.4 mmscmd (million metric standard cubic meters per day), equivalent to about 25% of India’s total gas supply. And the experts believe that the spillover effect is cascading into energy-intensive industries.

Datta says fertiliser plants have been receiving around 70% of their contracted gas supply, while production costs in glass, paper and pulp have increased by 20-30%, forcing some companies to curtail operations. Gas-dependent steel and metal processors have been able to meet only around 50-70% of customer demand, affecting the availability of alloy and special-grade steel used in automotive components. This is all because of the supply disruption linked to the ongoing US-Iran war.

Petrochemicals are another pressure point for several Indian sectors. Domestic petrochemical output has declined by 21% year-on-year, pushing up polypropylene and PVC prices. “These materials feed directly into plastics and packaging, which in turn are widely used by FMCG, pharmaceuticals, and food-processing companies. This creates a broader transmission mechanism for inflation. Companies first absorb higher freight, fuel, insurance, and input costs. Suppliers then renegotiate contracts or revise prices. Manufacturers face higher packaging and production costs, which can eventually be reflected in wholesale and retail prices,” adds Datta.

Srivastava says many companies are already renegotiating contracts signed before the latest escalation. New contracts are increasingly being written with clauses allowing extraordinary freight and other additional costs to be passed on. “Ultimately, the impact is falling on end consumers,” he says, adding that product prices could gradually begin rising as businesses become less willing to absorb unpredictable logistics costs.

Freight rises 150-300% for textile exporters

Home textile exporters are among the sectors facing pressure at both ends of the supply chain. Alongside higher outbound freight and longer transit times, domestic manufacturers depend on chemicals, petrochemical-derived materials, packaging, and other inputs, leaving them exposed to the rise in petrochemical and energy costs triggered by disruptions in the Gulf.

Vikas Singh Chauhan, Director at the Home Textile Exporters’ Welfare Association (HEWA), estimates that freight rates have risen by an average of 150-300% across several destinations.

Textile exporters are already facing the combination of rising shipping costs, longer delivery times, and raw material inflation.

Europe-bound freight has risen from around $2,000-$2,500 to $7,000-$8,400, according to HEWA. Rates to Onne in Africa have increased from about $3,800 to $6,000, while Latin America routes that earlier cost around $2,500-$4,000 are now quoting roughly $7,000-$12,500. Freight to the port of Ashdod in Israel has risen from around $3,500 to $7,000-$8,000, Singh says.

The Middle East has seen some of the steepest increases, with rates moving from around $300-$400 earlier to $4,000-$7,000, excluding some local destination charges.

Exporters are also grappling with mounting shipping delays. Chauhan says vessel booking and availability, which earlier took around three to four days, can now take 20-30 days, without any certainty that space will ultimately be allocated.

Transit time to Europe has increased from around 30 days to 60-70 days in several cases, according to HEWA.

HEWA has advised textile exporters to be cautious while accepting orders on cost and freight, or CFR, terms because freight rates are changing rapidly. Exporters are simultaneously facing increases in cotton yarn prices, leaving them exposed to both raw material and transportation costs. The association has also advised exporters to plan container bookings around 30 days in advance and sought government support to ease the longer payment cycle caused by shipping delays.


Supply chains redraw routes

The severe cost escalation is forcing logistics companies to reassess how cargo moves through the region.

According to Sharma of Parekh Global, cargo has been rerouted through Sohar, Jeddah, and Aqaba before being transported by road into parts of the Upper Gulf. The shift created trailer shortages and pushed road transportation costs to nearly three times normal levels.

Longer routes around the Cape of Good Hope are adding both transit time and fuel costs. Sharma says diversions can add around 10-12 days to voyages in some cases.

Srivastava says war-risk premiums are currently running at roughly $3,000-$5,000 on affected movements, while carriers are also levying emergency bunker and other surcharges.

Even if geopolitical tensions ease, freight markets may not immediately normalise. Srivastava estimates that shipping conditions could take another three to six months to stabilise after the underlying disruption ends.

Meanwhile, several exporters facing tight delivery schedules are increasingly evaluating air cargo.

According to Venkatesh Iyer, Vice President-Commercial at Sharaf Cargo Pvt. Ltd, the uncertainty around maritime trade has already resulted in a noticeable modal shift, “especially for time-sensitive cargo”.

“The shift has happened predominantly for Europe and the US because of the increase in transit time by sea,” Iyer says.

He says that geopolitical developments have also affected airline operations, and rising fuel prices have translated into higher air freight rates. “Airlines are constantly exploring opportunities to add up capacities whenever possible, as this helps to keep the capacity constant in this volatile market. Exporters today have also factored longer transit in shipping, so we see an increase of about 20% in our air volumes bookings compared to pre-crisis levels,” he says.


From just-in-time to just-in-case

Beyond immediate freight decisions, companies are reconsidering how much inventory they hold and where they source critical inputs.

Rahul Sanghvi, Managing Director and Partner at Boston Consulting Group (BCG), says energy-intensive and chemical-dependent companies are increasingly moving from just-in-time to just-in-case inventory for critical inputs, such as crude oil, LNG, and fertiliser feedstock, despite the additional working capital involved.

Companies are also looking beyond the Gulf towards suppliers in West Africa, the US, and Latin America, while working with multiple shipping lines and pre-negotiating alternative routes.

The disruption is influencing procurement decisions as well. Divya Kumar Gulati, Chairman of the Compound Livestock Feed Manufacturers Association of India, points to reports of Mangalore Refinery and Petrochemicals seeking crude supplies under terms that avoid both the Red Sea and the Strait of Hormuz. The broader industry view is that increased cost pressure ranges from above 30% compared to pre-crisis levels. Gulati says poultry, aquaculture, and dairy businesses are facing acute pressure from higher freight, fuel, and fertiliser costs due to their dependence on globally sourced feed ingredients and additives. "Our livestock members have no option but to pass this cost increase on to end customers. Also, higher fertiliser costs could also eventually feed into the prices of crops, such as maize and soybean,” he says.

According to Gulati, the latest disruptions reinforce the need for India to accelerate logistics diversification, strengthen multimodal connectivity, and develop alternative trade corridors.

Echoing the need for alternative trade and energy routes, Nisha Taneja, Senior Visiting Professor at the Indian Council for Research on International Economic Relations (ICRIER), says India has increasingly leveraged the Port of Fujairah in the UAE, located outside the Strait of Hormuz, as an important oil storage and bunkering hub to reduce risks associated with the maritime chokepoint. “We need more strategic steps like these,” she says.

For logistics providers, the lesson from such developments means resilience is no longer measured solely by the ability to move cargo from one port to another. It increasingly depends on how quickly companies can reroute shipments, communicate with customers, and diversify transport options.

As Sanghvi summed it up, resilience is “not a one-time fix—it’s an ongoing discipline of diversification, buffer capacity, and scenario planning.