Vietnam trade ministry urges firms to hedge risks as Middle East conflict escalates

Vietnam’s Ministry of Industry and Trade has urged businesses to proactively hedge risks and review logistics and insurance arrangements as escalating conflict in the Middle East threatens to push up global fuel and commodity prices and disrupt supply chains.

The ministry’s import-export department said it expects consumer prices, fuel costs and global oil prices to trend higher in the coming period, creating indirect and multi-layered negative impacts on Vietnam’s production and trade activities.

In a new statement, the department cited a sharp escalation in regional tensions after the United States and Israel launched large-scale air strikes against Iran on February 28. Within 24-48 hours of the attacks, all sides signalled preparations for a prolonged conflict, heightening risks for international transport, trade flows, and global supply chains.

The department warned that higher fuel prices would drive up sea and air freight costs, while also disrupting cargo routes serving Gulf countries. Several Middle Eastern nations have restricted or closed their airspace for security reasons, forcing cargo flights to reroute and increasing transit times and costs.

Shipping through the Strait of Hormuz has been severely disrupted following the strikes. Iran has warned vessels that passage through the strait is unsafe, prompting shipping lines to avoid the area or alter routes, significantly raising fuel consumption and logistics expenses, the ministry said.

Focus on logistics contracts and insurance

Against this backdrop, the import-export department called on export-import and logistics industry associations to closely monitor developments and maintain regular communication with relevant authorities to keep members informed and help them adjust production, shipping, and trade plans, in order to avoid congestion and minimize disruptions.

The ministry recommended that companies diversify supply sources and seek alternative markets with similar demand profiles to reduce reliance on exports to Israel, Iran and the broader Middle East, and strengthen preparedness for similar shocks in the future.

It also urged firms to pay closer attention to logistics, delivery and insurance clauses when negotiating trade contracts, including force majeure provisions, compensation mechanisms, and cost-sharing arrangements in the event of disruptions. Businesses were advised to ensure adequate insurance coverage to mitigate potential losses at destination markets.

In addition, companies were encouraged to proactively analyze trade data and geopolitical developments in coordination with relevant ministries and agencies, including trends in freight rates, surcharges and transport costs, to develop timely response strategies.

The ministry called on firms to establish contingency and adaptation plans to limit risks and losses from disruptions to international trade and transportation, and to prepare rapid response measures to safeguard supply chains.

Finally, businesses were advised to maintain regular contact with government bodies such as the import-export department, the trade promotion agency and Vietnam’s overseas trade offices to identify new orders and promising markets, enabling them to diversify and fully capitalize on emerging opportunities.