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UK Financial Outlook: Impact of Middle East Tensions

May 13, 2026 | , , ,

Global freight markets remain heavily influenced by instability across the Middle East, with disruption to ocean and air networks sustaining elevated costs, longer transit times and growing operational volatility. 

Restricted energy flows are continuing to drive sharp increases in bunker and jet fuel pricing, while reducing effective transport capacity well beyond the Gulf region.

For the UK, the impact is particularly significant. As a major energy importer, the economy remains highly exposed to rising oil and gas prices, with the resulting cost pressures now feeding rapidly into logistics, manufacturing and wider financial markets.

Oil prices have risen sharply in recent months, while UK gas prices have also moved significantly higher. This has renewed inflationary pressure across the economy, increasing transport and supply chain costs while also pushing up the price of consumer and industrial goods.

The current environment increasingly mirrors the energy shock seen in 2022, although the transmission through financial and logistics markets is now occurring more quickly due to the continued fragility and interconnected nature of global supply chains.

At the same time, wider economic indicators remain mixed. UK manufacturing activity strengthened in April, with the PMI rising to 53.7, its highest level since May 2022, supported by improved domestic and export demand. However, supply chain pressure intensified sharply during the same period, pushing input costs higher and weakening overall business confidence.

Consumer and industrial sentiment also remains cautious, with inflation concerns, higher utility costs and geopolitical uncertainty continuing to weigh on demand expectations and investment appetite.

Higher borrowing costs and weaker confidence

Financial markets have reacted quickly to the worsening outlook. At the start of 2026, expectations centred around a gradual cycle of UK interest rate cuts. That narrative has now shifted materially, with markets increasingly pricing in a “higher for longer” interest rate environment as policymakers attempt to manage renewed inflation risks.

The Bank of England now faces a difficult balancing act. Much of the inflationary pressure is externally driven by energy disruption and supply constraints, meaning higher interest rates alone cannot resolve the underlying cause. However, allowing inflation to remain elevated risks embedding longer-term cost pressures across the wider economy.

As a result, expectations for rate reductions have largely been pushed back, while the possibility of rates remaining elevated for an extended period has increased significantly.

Currency and bond markets are also reflecting growing uncertainty. Sterling has become more volatile as investors weigh higher UK interest rate expectations against concerns around weaker growth and rising import costs. Meanwhile, UK gilt yields have risen sharply, increasing borrowing costs across government, corporate and household sectors.

For businesses, the implications are becoming increasingly clear. Rising fuel and transport costs are creating additional margin pressure at the same time as higher financing costs reduce investment flexibility and increase operational risk.

In logistics markets, these pressures are compounding existing disruption across freight networks. Longer transit times, volatile routing conditions and elevated operating costs are continuing to affect ocean, air and road freight movements, reinforcing the need for greater agility and contingency planning across supply chains.

Planning for continued volatility

Much will now depend on the duration of disruption across the Middle East and the trajectory of global energy prices. A stabilisation in energy markets could help ease inflationary pressure later in the year. However, any prolonged restriction to energy flows or escalation in regional tensions is likely to sustain upward pressure across fuel, transport and borrowing costs.

For UK businesses, the operating environment is increasingly being shaped by geopolitics as much as underlying demand. Preparing for continued volatility, tighter financial conditions and more complex supply chain risks is therefore becoming a central part of operational and commercial planning.

Metro continues to support customers with flexible routing solutions, multimodal freight options and proactive supply chain planning designed to help businesses respond more effectively to changing market conditions, rising cost pressure and ongoing disruption across global transport networks.

To discuss how current economic and supply chain conditions could impact your business, EMAIL Laurence Burford, Chief Financial Officer.

Hormuz satellite

Middle East disruption continues as Metro scales contingency solutions

Apr 29, 2026 | , , , , , , , , ,

The extension of the US–Iran ceasefire has done little to stabilise operating conditions in the region, with last week’s seizure of two MSC-managed container vessels by Iran’s Islamic Revolutionary Guard Corps in the Strait of Hormuz. 

The incident highlight the ongoing risk to commercial shipping and reinforces the reality that access through Hormuz remains severely constrained, with container flows through the Strait largely suspended.

Land-bridge solutions under pressure as demand surges

As traditional shipping routes have been disrupted, supply chains have shifted rapidly towards alternative solutions, particularly land-bridge routes across the Gulf.

However, these corridors are now under significant strain. Demand for trucking capacity has surged well beyond available supply, with rates on key lanes such as Jeddah to the UAE rising four to five times above pre-conflict levels.

Jeddah has become the primary gateway following security concerns at Khor Fakkan and Salalah, concentrating volumes into a single entry point and creating further bottlenecks. In some cases, demand for road capacity has reached multiples of available supply, driving sharp price escalation and limiting flexibility for shippers.

Operational disruption now outweighs capacity availability

One of the defining characteristics of the current market is that disruption is being driven less by a lack of physical assets and more by how networks are operating.

Ocean carriers are navigating around both the Red Sea and Hormuz, adding 15–20% to voyage distances, increasing fuel consumption and reducing effective capacity. At the same time, global port congestion has exceeded 3 million TEU, further impacting reliability. 

Airfreight networks are also adjusting to restricted airspace and reduced Gulf capacity, while road freight is absorbing increased volumes through regional corridors, adding complexity and extending transit times.

The result is a market where capacity exists, but is harder to access, less predictable and more expensive to deploy.

Pricing volatility accelerates as fuel and disruption outpace contracts

Freight pricing is struggling to keep pace with the speed of change.

Across ocean freight, emergency bunker surcharges are now widely applied, while traditional fuel adjustment mechanisms lag behind real-time cost increases. In airfreight, fuel surcharges are being revised more frequently as jet fuel prices continue to rise. In road freight, fuels costs typically represent over 30% of operator costs, placing short-term pressure on carriers and increasing the likelihood of further cost pass-through. 

The situation is further complicated by simultaneous pressure across multiple global chokepoints.

Disruption linked to the Strait of Hormuz is occurring alongside continued Red Sea instability and wider geopolitical friction across key corridors. This has created a structurally higher-risk operating environment, where any escalation can quickly remove capacity, extend transit times and increase costs across all modes. 

Scaling solutions to maintain cargo flow

In response, Metro has significantly increased its operational focus on the region, with time dedicated to resolving Middle East-linked problems rising by more than 1000%.

The focus is on execution: ensuring cargo continues to move and that shipments already in transit are delivered using the most effective available solution.

Metro is actively supporting customers through:

  • Dynamic re-routing of in-transit cargo, avoiding disruption hotspots
  • Alternative gateway strategies, identifying viable entry points outside high-risk zones
  • Airfreight deployment, where speed and reliability are critical
  • Land-bridge and multimodal solutions, maintaining flow where ocean routes are constrained

This flexible, hands-on approach is essential in a market where conditions are changing rapidly and pre-planned routes are no longer sufficient.

If you have cargo moving to, from or through the Middle East, or shipments currently held en route, Metro can help you identify and implement the most effective resolutions.

EMAIL Managing Director, Andrew Smith, today to secure capacity, protect transit times and keep your supply chain moving in a rapidly changing environment.

refinery

Fuel shocks across ocean, air and road freight

Apr 29, 2026 | , , , , , , , , , , , , , , , , , , , ,

With the Strait of Hormuz effectively closed, crude oil can still exist within the region, but refined products, which includes marine fuel, jet fuel and diesel, can no longer move freely to key consumption markets, which has triggered a sharp divergence in pricing and availability across all modes. 

For shippers, this creates a higher cost floor, as transport fuels are no longer moving in line with crude. Marine bunker, jet fuel and diesel each have their own supply chains and crack spreads (the margin between crude and refined products), and are now behaving independently of Brent. This is driving bunker-led cost pressure in ocean, jet fuel-driven inflation in air, and diesel-driven cost escalation in road. 

Ocean freight: bunker costs reset the pricing floor

In ocean freight, bunker fuel has become the dominant cost driver. Asian fuel hubs, particularly Singapore, are experiencing significant pressure as rerouted vessels increase demand while supply remains constrained.

This has created a disconnect between traditional pricing mechanisms and real-time costs. 

Emergency bunker surcharges are being applied across major trade lanes, while standard adjustment factors lag behind market conditions and may only catch up with current fuel inflation later in the year.

The result is a structurally higher cost base, with ocean rates now reflecting fuel volatility rather than underlying demand alone. 

Air freight: jet fuel shortage tightens capacity

Air freight is facing the most acute fuel-driven pressure. Gulf refineries, which typically supply jet fuel to Europe and Asia, are unable to export at normal levels, creating a shortage of refined product.

This has driven a sharp increase in jet fuel prices, with crack spreads widening dramatically from around $16 per barrel pre-crisis to approximately $100 in some regions. 

This regional price divergence means that Asia and Middle East jet fuel benchmarks sit substantially above North American levels, meaning that every kilo of freight uplifted is starting from a materially higher fuel cost base. 

As a result, airlines are adjusting networks, reducing marginal capacity and prioritising fuel efficiency, tightening available uplift and sustaining elevated airfreight rates.

Road freight: diesel inflation feeds through to transport costs

Road freight is also seeing significant cost pressure, with diesel prices rising independently of crude due to refinery constraints and regional supply dynamics.

Fuel accounts for roughly 30% of total truck operating costs, meaning sustained diesel inflation is already feeding through into pricing. 

At the same time, increased reliance on overland routes across the Middle East is adding further demand pressure, compounding both cost and capacity challenges.

What this means for shippers

  • Expect fuel-driven cost volatility across all modes
  • Plan for longer and less predictable transit times
  • Build flexibility into routing and inventory strategies
  • Monitor surcharge mechanisms

Fuel disruption, routing constraints and capacity pressure are now closely linked. Managing one without the others is no longer effective.

Metro works with customers to model alternative routes, balance mode selection and manage cost exposure in real time. If you are seeing rising costs, delays or uncertainty in your supply chain, EMAIL managing director, Andrew Smith, to secure the most effective solution for your cargo.

Hong Kong X ray costs and delay fears

Airfreight rates remain elevated with disruption likely to delay recovery

Apr 29, 2026 | , , , , , , , , , , ,

Airfreight markets have undergone a prolonged period of elevated pricing since the start of Middle East hostilities and despite softer demand in recent weeks spot rates have continued to rise sharply. 

Global spot rate indices are up by more than 35% year on year and have increased by over 40% since the onset of the Middle East crisis, highlighting the extent to which supply-side disruption, rather than demand, has been driving the market.

This reflects a structural shift, where fuel availability, routing complexity and network disruption are now setting the baseline for pricing.

Fuel supply constraints begin to tighten capacity further

The next phase of disruption is already emerging. The UK has taken delivery of the final shipments of jet fuel that transited the Strait of Hormuz before the conflict escalated, meaning supply constraints are now expected to intensify.

Jet fuel availability is becoming a defining factor in airline operations, with rising costs and limited supply forcing carriers to reassess schedules. Flight cancellations have already begun, and reinstating these services is not straightforward. Aircraft, crew availability, regulatory approvals and network coordination all create barriers to a rapid return of capacity.

As a result, even where demand softens, supply is tightening again, reinforcing upward pressure on rates.

Capacity recovery remains uneven and fragile

While global capacity has recovered from the initial shock, when supply fell by around 20% at the start of the crisis, it remains below previous levels and unevenly distributed.

Capacity from Middle East and South Asia origins is still significantly constrained, with reductions of around 20% year on year, limiting the availability of key transit routes. At the same time, global demand has softened, falling by approximately 8% year on year, but this has not yet translated into lower pricing.

This imbalance highlights a key market dynamic: capacity is returning, but not necessarily where it is needed, and operational constraints continue to limit how effectively it can be deployed.

Trade lane volatility reflects shifting network priorities

Rate movements are now highly variable by trade lane, reflecting how airlines are repositioning capacity.

From some origins, rates have increased by more than 50% year on year, while others have seen more moderate gains or even short-term declines. European outbound routes remain mixed, with strength on certain long-haul lanes offset by weaker demand elsewhere.

At the same time, airlines are redeploying aircraft to higher-yield routes rather than simply rebuilding pre-conflict networks, creating further imbalance across global capacity.

Recovery will take time, even under stable conditions

Even if conditions stabilise, a rapid return to normal is unlikely.

Airlines will be cautious about reinstating routes through the Middle East, given the fragility of the ceasefire and ongoing geopolitical risk. Airspace restrictions, insurance considerations and operational planning will all slow the recovery process.

Passenger networks, vital for critical belly-hold capacity, may also take time to rebuild, as demand for travel into the region recovers gradually. This will further constrain available cargo capacity.

Even with weaker volumes in some regions, rates are holding firm or increasing, and any downward correction is likely to be gradual rather than immediate.

Secure capacity in a constrained market

With fuel supply tightening, capacity uneven and recovery uncertain, airfreight is entering a period where access and planning matter more than ever.

Metro works closely with airlines and partners to secure capacity, identify alternative routings and maintain reliability in a disrupted market. If your supply chain depends on airfreight, EMAIL our Managing Director, Andrew Smith, to protect space, manage cost exposure and keep your cargo moving.

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