Shippers confronting a squeeze from elevated jet fuel prices and logjams in key Middle East waterways have begun shifting freight along unconventional corridors, with some routing cargo via Los Angeles to achieve a balance of speed and cost. Industry executives say a recent ceasefire between Iran and the United States is unlikely to deliver rapid relief.
One U.S. freight forwarder reported that customers who previously routed electronics and other fast-moving consumer goods from Asia to Europe through Middle East hubs are increasingly opting to move merchandise by a combined ocean-and-air path through Los Angeles. That approach, the forwarder said, offers a middle ground - substantially quicker than an ocean voyage around the southern tip of Africa yet markedly less expensive than flying cargo directly.
"It’s a lot faster than going by ocean around (the southern tip of Africa), but much, much cheaper than doing air direct," said Ryan Petersen, CEO of Flexport.
Airfreight costs have climbed sharply as strong demand meets elevated jet fuel prices following Iran’s continued blockage of the Strait of Hormuz. Market data from WorldACD shows air cargo capacity to the Middle East has fallen by more than 50% on a year-on-year basis over the last two weeks. Flexport reported that long-term contract air cargo rates from Vietnam to Europe have nearly doubled to $6.27 per kilogram compared with levels before the conflict.
By contrast, air rates on the Los Angeles-to-Paris lane have risen only modestly - about 8% - as airlines increase passenger services in response to strong travel demand, thereby opening more bellyhold capacity for freight.
"We could see a bump if trade disruptions persist in the Middle East," said Noel Hacegaba, CEO of the Port of Long Beach, which is part of the Los Angeles port complex, the busiest seaport area in the United States.
Lost air capacity and uncertain recovery
Global air cargo capacity, which had been expected to expand by 5.5% this year, has instead declined by 1% so far as a result of the Iran conflict that began in late February, according to Marco Bloemen, managing director at consulting firm Aevean. Bloemen noted that how capacity trends evolve will depend in part on whether major Gulf carriers can restore their widebody passenger aircraft, a fleet that represents roughly half of the region’s air cargo capacity.
Niall van de Wouw, chief air freight officer at transportation pricing platform Xeneta, warned that if tourism to the Gulf lags after the fighting subsides, carriers may scale back passenger services, which would reduce bellyhold capacity and further tighten airfreight supply. Reflecting operational shifts, British Airways said on Thursday it would cut flights to the Middle East when services resume.
Dedicated cargo operators are continuing service in the region but under adapted plans. UPS and similar firms are reported to be using contingency arrangements because some pilots are not flying to hubs such as Dubai. Third-party charter aircraft have stepped in to take on some of the displaced flying, but several industry sources expect jet fuel supplies to remain constrained and expensive for months.
"The major issue for everyone is the massive hike in fuel prices," said Dan Morgan-Evans, group cargo director at Air Charter Service.
The price shock has forced some shippers to accept much higher bills to preserve delivery timelines. Ryan Carter, Americas executive vice president at AIT Worldwide Logistics, described a case in which a customer paid at least five to six times more to deliver oil drilling equipment bound for Saudi Arabia by air and truck after an originally planned ocean shipment from Houston was canceled because of the conflict.
"Sometimes the cargo just has to move," Morgan-Evans added, underscoring why companies often absorb higher transport costs despite the strain on margins.
Implications for logistics and ports
The combined pressures of tightened air capacity, higher fuel costs and rerouting through alternative hubs are reshaping operational decisions for freight forwarders, carriers, ports and cargo owners. Los Angeles has emerged as a practical pivot point for some Asia-Europe flows because the route can exploit available passenger bellyhold capacity on transatlantic flights while avoiding the most congested or risky Middle East passages.
Industry participants say the near-term picture will hinge on the pace of restoration of Gulf passenger services, the availability and cost of jet fuel, and how long disruptions in the region persist. Until those conditions change materially, a number of shippers are expected to maintain or expand the use of less conventional transit combinations to protect delivery schedules and manage costs.