- Potential opportunities on emerging trade, sourcing shifts
- Significant portion of global trade via Strait of Hormuz
- Tea industry highly exposed
Sri Lanka’s export sector is likely to face a severe impact if the conflict in the Middle East escalates and continues for an extended period, exporters warn, while acknowledging that the situation may create new opportunities for the country to capitalise on emerging trade and sourcing shifts.
Speaking to The Sunday Morning Business, National Chamber of Exporters of Sri Lanka (NCE) Secretary General and Chief Executive Officer Shiham Marikar stated that Sri Lankan exporters’ heavy reliance on the Middle East, both as a destination market and as a trade hub, had created legitimate concerns over potential delays and rising shipping costs amid the escalating conflict.
He noted that many Sri Lankan exporters either sold directly to Middle Eastern markets or used hubs such as Dubai to access other global destinations.
Marikar further explained that a significant portion of global trade passed through the Strait of Hormuz, making it a critical maritime route for Sri Lankan exporters.
Should the conflict intensify, vessels may avoid the route, leading to longer transit times and higher freight charges. Alternatively, exporters may be compelled to absorb increased insurance premiums due to heightened risk.
He also highlighted concerns over rising oil prices and their potential impact on production and transportation costs.
According to Reuters, brokerages including J.P. Morgan and Bernstein expect Brent crude prices to exceed $ 100 per barrel if the conflict persists. Reuters further reported that Brent crude futures rose by $ 5.63, or 7.2%, to $ 83.36 per barrel on Wednesday (4), after reaching a high of $ 85.12, which was the highest level since July 2024.
Marikar additionally warned that the potential loss of export markets such as Iran, particularly for tea, could negatively affect the export sector. However, he noted that so far no export shipments had been cancelled, with exporters closely monitoring whether the conflict would de-escalate.
At the same time, he observed that the situation could present opportunities for Sri Lanka. With businesses reassessing risks associated with trading through the Middle East, Sri Lanka could position itself to attract more direct sourcing arrangements.
“For example, there are companies in the Middle East that act as sourcing agents, purchasing goods from various countries and shipping them onward. Sri Lanka could attract more direct sourcing and business opportunities,” he said.
Speaking to The Sunday Morning Business, Sri Lanka Tea Board (SLTB) Chairman Rajpal Obeyesekere stated that the Sri Lankan tea industry was highly exposed to the Middle Eastern market.
He noted that based on the latest information received, most shipping lines operating to destinations in the region had been suspended, except for limited cargo movements. As a result, shipments are now being rerouted through alternative channels, with shipping lines quoting significantly higher freight rates.
“These shipping lines are currently under serious pressure due to disruptions to the Strait of Hormuz specifically and the reluctance to operate along affected corridors, resulting in the need for alternative routing. This will affect the tea industry overall unless the situation arrives at some form of settlement. The current scenario is unfavourable,” he said.
Obeyesekere further revealed that at this week’s tea auction, prices had dropped by approximately Rs. 100 per kg for tea varieties typically consigned to the Middle Eastern region. In addition, the average unsold quantity at the auction increased by around 8–10%.
He emphasised that a substantial portion of Sri Lanka’s tea exports was directed towards the Middle East, adding that a prolonged disruption would inevitably have a negative impact on the industry.
However, he observed that during previous conflicts, both the industry and importers had managed to identify alternative routes and channels to move goods into affected markets. He cited past conflicts in countries such as Iraq and Libya, where trade had continued through indirect means despite challenging conditions.