Despite being helpful, the initiative of launching new rail freight services throughout Saudi Arabia will unlikely be enough to move significant volumes. First and foremost, freight trains cannot move all those volumes. Even in Saudi Arabia, where it is possible to stack two containers per wagon, convoys can move up to 400 units. The average capacity of container vessels is ten times that, with the largest ones able to handle 24,000 TEUs.

Middle Corridor not ready yet

For strong multi-corridor Europe-Asia connectivity it is necessary to have diversion routes that can pick up volumes in situations like the current one. For rail, this would be the Middle Corridor, a multimodal link stretching from China to Europe via Central Asia and the Caspian and Red seas.

“Disruption at sea always increases interest in rail options, including the Middle Corridor”, Clowes added, “that being said, any shift would be gradual. Capacity, border processes and transfers between networks all create pinch points.” In other words, the Middle Corridor is not (yet) ready to become the main route.

Waiting for a Red Sea crisis too?

Rail, Clowes argued, can still be useful in cases like these for “time-sensitive, higher-value cargo when schedules are under pressure”. It needs to be mentioned that, so far, the main problem resides with the Strait of Hormuz and not the Red Sea. The closure of the former ‘only’ affects trade with the Gulf countries, while another crisis in the latter might cause ships to avoid the Suez Canal, as already happened last year.

“If Asia to Europe services start diverting via the Cape of Good Hope, you can be looking at an extra 10 to 15 days”, Clowes pointed out. This is where the Middle Corridor and rail freight might be helpful, as they can provide shorter transit times, albeit with much smaller volumes. And sometimes, he added, it is not even necessary for an actual escalation. “Shippers, insurers and carriers start pricing in risk before anything formally changes”.

Can Plan B become Plan A?

Over the past few years, the routes usually considered as Plan A for trade between Asia and Europe – Trans-Siberian rail and Arabian Sea – have become somewhat problematic. Both routes have been dealing with lower volumes over the past three or four years. Due to this, interest in alternative routes such as the Middle Corridor has increased exponentially. If alternative routes are valid, they might become the norm, even once conflicts and tensions pass.

“Freight markets rarely reset overnight. Even after a conflict eases, insurers and carriers can remain cautious, and routing decisions tend to lag because everyone is reassessing risk”, Clowes said, concluding that “the longer the disruption lasts, the more likely it is that ‘Plan B’ becomes part of the permanent operating model”.

Of course, this would require valid ‘Plan B’ routes. And currently, at least for what concerns the Strait of Hormuz and the Gulf, the main option for Plan B remains the road, as the railway network in the area is still under development. CMA CGM, for example, recently said it “is deploying emergency multimodal solutions” via UAE, Saudi Arabia or Oman, but they are all trucking services.

Closure of Strait of Hormuz is not likely

Iran could decide to close this vital artery as a retaliation to the recent attacks orchestrated by the U.S.. However, the possibility of this happening remains low, as many think it would lead to an economic suicide for Teheran. “Sometimes, the threat is as potent as the actual action”, Kosmala added, saying that the country “will not do anything extreme like what the Houthis originally did shooting at ships crossing Bab al-Mandab”.

The Strait of Hormuz is the world’s most critical oil checkpoint. Around 20% of the oil consumed globally needs to cross it, and it is especially important for Asian countries including China, India, Japan and South Korea. For example, China imports 90% of the Iranian oil meant for exports. The Strait of Hormuz, however, is also very important for other countries in the area (Saudi Arabia, Oman and UAE), which rely on it to export their oil.

Worse consequences for Europe than China

Consequently, fully closing this passage remains an unlikely scenario, Kosmala underlined, as it would create tensions that Iran wants to avoid. “Just like the access to the Suez Canal is available to Chinese ships without worries, similar politics will play out here. Friends will always be spared the risk and the stress”, he commented.

The same cannot be said for Europe and its economy. “That has been already disrupted as European imports of oil and gas keep paying higher insurance premiums and European exports to the Gulf countries have to travel around Africa or in smaller quantities on smaller ships traversing Suez”, Kosmala claimed.