A spate of recent conflict between Iran and Israel has elevated security tensions across the Middle East to their highest level since the tanker wars of the 1980s. Meanwhile, President Trump’s comprehensive “reciprocal” tariff approach—now applied to nearly all U.S. trading partners—is increasing the cost of U.S. exports across the Middle East and North Africa (MENA). The double shocks are pinching American firms that were just starting to reap the benefit of a rebound in sales to the region, which totaled more than $80 billion in 2024.
Strategic choke-points at risk
Much of the worry revolves around two sea lanes: the Strait of Hormuz and the Red Sea/Bab el-Mandeb. Hormuz is responsible for shipping about a third of crude transported by sea and 15 percent of refined product. Following Israel’s June attack on Iranian installations, the world’s biggest shipping group, BIMCO, cited a “modest decline” in transits as owners avoid the 21-mile-wide waterway. Greece, where the world’s biggest tanker fleet is based, officially instructed its ships to “think again about passage” through Hormuz until the situation clarifies.
Geopolitical tensions increase trade risks
The recent escalation of tensions between Iran and Israel has instilled deep anxiety about Middle Eastern shipping routes’ security, especially the vital shipping lanes across the Strait of Hormuz and the Red Sea. The routes are significant transits for international trade, such as the shipment of raw material and finished goods between the Middle East and the United States.
The delicate peace established by President Trump earlier this year has maintained so far, but any renewed fighting would risk derailing oil exports and other cargo shipments. The resulting disruptions would help to further spur inflationary pressures in the American economy, already getting a boost from Trump’s highest tariffs on imports. The experts caution that renewed fighting would tend to drive oil prices even higher, stimulating economic sensitivities at a time when the Federal Reserve is not keen to raise interest rates.
Impact of Trump tariffs on trade in the Middle East
Since April 2025, the Trump administration has been imposing a standard 10% tariff on all U.S. imports, higher-than-balanced retaliatory tariffs on nations with large trade deficits, some of which are situated in the Middle East region like the United Arab Emirates, Saudi Arabia, Jordan, and Tunisia. The tariffs override all other trade agreements except for USMCA-compliant goods.
The tariffs have made trade relations with member countries of the Gulf Cooperation Council (GCC) more complex, which in the past had close economic relationships with the U.S. While Middle Eastern exporters did see some initial increase in demand as U.S. companies purchased ahead of tariffs, the medium term remains cautious. Increased tariffs lower the price competitiveness of Middle Eastern exports in the U.S. market, most particularly for oil, gas, and petrochemicals.
U.S. wood products manufacturers vulnerable to both geopolitical unrest and trade barriers
U.S. wood products manufacturers are most susceptible to the dual threats of geopolitical unrest and trade barriers. The Middle East is a critical transit zone for timber importation and exportation, with shipping lanes traversing the Suez Canal and Strait of Hormuz along with other surrounding waterways. Any level of disruption from conflict has the potential to delay shipping, raise costs, and introduce bottlenecks in the supply chain.
Producers are apprehensive that instability may involve higher insurance costs on cargo, ship re-routing, or brief shutdowns of ports. All these would not only increase business costs but also pose the risk of undermining timely delivery promises to customers, further compromising the competitiveness of U.S. wood products abroad. One importer recently told Newsweek “We the manufacturers have ware houses full of goods and we are not able to ship them out because of the conflict.”
Middle Eastern economic resilience and adaptation
In spite of such odds, Middle East economies, especially in the GCC, are showing resilience and strategic evolution. According to PwC’s Middle East Economy Watch, the region is on a positive path with robust growth momentum in non-oil sectors like digital transformation and AI infrastructure as a move to diversify away from oil dependency. The GCC GDP will expand by 3.1% in 2026 on the back of higher oil production and robust non-oil economic activity.
Additionally, local leaders are eager to ramp up economic cooperation with the U.S. in spite of being under tariff pressure, cashing in on more than $1 trillion of deals announced on President Trump’s tours. This is a balancing act between dampening short-term tariff pressures and sustaining long-term strategic relations.
Outlook for U.S.-Middle East trade relations
The confluence of geopolitics and trade policy creates a complicated context for U.S.-Middle East commerce. The Trump tariffs added expense and risk, and the Israel-Iran war poses threats to the security of vital shipping routes. Combined, these increase the threat of supply chain disruptions that can hurt a variety of industries, such as the production of timber.
For US companies that depend on Middle Eastern trade corridors, the future is to track geopolitics closely, diversify supply chains as much as possible, and work with policymakers to cushion tariff shock.
Read more: What is stagflation? Fed worried about higher prices and low growth
