Why shipping, insurance and inflation now share the same map

The militarisation of key maritime corridors has quietly rewritten the operating assumptions of global trade.

From Samirul Ariff Othman

Global business, economics and politics now operate at the intersection of geopolitics, geoeconomics and geostrategy. Making sense of today’s economy requires seeing how security has become a cost of doing business.

By 2025, the most consequential shift in the global economy did not occur in boardrooms or factories. It occurred at sea.

The militarisation of key maritime corridors has quietly rewritten the operating assumptions of global trade. What was once treated as episodic disruption is now structural risk. And what was once assumed to be free — safe passage — now has to be purchased.

This is the realm where global business, economics and politics converge. Strategic clarity begins with recognising that trade routes are no longer neutral plumbing. They are strategic terrain.

The world’s maritime system now revolves around two interconnected clusters of chokepoints. In the west lies the energy and Europe-Asia artery: the Strait of Hormuz, the Red Sea and the Suez Canal. In the east lies the manufacturing artery: the South China Sea and its Southeast Asian gateways, most notably the Strait of Malacca.

Individually, each chokepoint has long been known to strategists. What is new is their integration into a single, stress-transmitting system.

Start with the western cluster. The Strait of Hormuz remains the primary valve for global oil and LNG flows.

Any rise in tension there immediately alters energy risk premia, shipping insurance and stockpiling behaviour across Asia and Europe. The Red Sea and Suez Canal then determine whether Asian and European supply chains can connect efficiently.

Recent experience has shown that these routes can remain physically open yet economically impaired — through missile threats, naval alerts, insurance exclusions and rerouting decisions driven by probability rather than certainty.

Roughly one-fifth of global oil and LNG flows transit the Strait of Hormuz, while trillions of dollars’ worth of manufactured goods are shipped through the South China Sea each year.

Ships still move. But they move at a higher price.

That pressure does not stop in the Middle East. It transmits eastward.

When Europe-Asia shipping is rerouted around Africa, voyage times lengthen, effective fleet capacity shrinks, and freight rates rise globally.

Energy importers become more sensitive to delivery assurance. Inventory buffers grow, capital is tied up in transit and inflation creeps in quietly — without the drama of a formal blockade.

This is where Southeast Asia becomes the chokepoint multiplier.

The South China Sea is not a single route; it is a funnel. Manufacturing exports from China, Japan, Korea and Asean converge here before being channelled through narrow straits.

The Strait of Malacca is the most efficient of these — and therefore the most exposed. Alternatives exist, but they are not neutral.

The Sunda Strait is shallow and constrained. The Lombok Strait is deeper, but longer and costlier. Beyond these lies the last resort: a detour south of Australia that adds weeks in travel time, raising fuel, insurance, and financing costs.

In other words, there is no cheap detour. Only repricing.

Militarisation changes the logic of trade in three ways. First, insurance premia become sticky. Once a route is classified as persistently risky, costs do not fully unwind.

Second, diversion costs become inflationary. Longer routes mean higher operating expenses and working capital requirements that are passed down supply chains.

Third, naval presence increasingly follows commercial density. Security provision becomes uneven, conferring advantages on some flags, firms, and states over others.

Trade does not collapse under these conditions. It stratifies.

Large firms with bargaining power, diversified fleets and state backing adapt more easily. Smaller exporters and developing economies pay more for access to the same markets.

Efficiency gives way to resilience as the primary design principle of supply chains.

For Asean, this reality is uncomfortable but inescapable. Geography, once a passive advantage, has become an active variable in other countries’ risk calculations.

Southeast Asia is no longer just a beneficiary of global trade flows; it is where energy risk from the west meets manufacturing risk from the east. Stability in the region is now priced into everything from European consumer goods to Asian industrial inputs.

This is why the conversation must move beyond asking whether a strait will close. That is the wrong question. The right question is how much assurance now costs — in insurance, inventory, time and strategic alignment.

Strategic clarity in 2026 means understanding that global business operates inside a geopolitical envelope. Geoeconomics translates that envelope into prices and competitiveness. Geostrategy determines who bears the costs and who captures the rents of security.

The world has not deglobalised. It has repriced globalisation. Trade still flows, but under a new logic: security is no longer assumed; it is purchased. Making sense of everything today begins — and ends — with that recognition. - FMT

Samirul Ariff Othman is a lecturer, international relations analyst and a senior consultant.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.