Impact of Suez Canal Closure on International Trade Following Arab-Israeli Conflicts

The strategic significance of the Suez Canal in facilitating international trade dates back to its opening in 1869. However, the canal's closure during the Arab-Israeli conflicts significantly altered global trade dynamics. This article explores the impact of the canal's closure, its lasting effects, and the subsequent innovations that emerged as a consequence.

Initial Blockade and Political Motivation

The Suez Canal’s blockage was not initiated by Israel but by Egyptian President Nasser, who sank several ships in the canal to serve a political purpose. The blockade aimed to pressure trading nations to compel Israel to withdraw from Sinai. Despite these efforts, the canal remained closed for eight years, until June 1975, following Nasser’s death in 1970.

Impact on Fuel Costs and Spoilage

The closure of the Suez Canal increased fuel costs dramatically. Traditionally, goods traveled from the Mediterranean to South-East Asia via a longer route around Africa, which was more fuel-intensive. As a result, when goods finally reached their destinations, they often arrived spoiled, affecting manufacturers, retailers, and consumers. Suppliers faced financial strain and retail stores struggled to meet their obligations due to stock shortages.

Revenue Shifts in Libya and Algeria

The closure of the Suez Canal led to an increase in the value of Libyan and Algerian oil. These countries could now bypass the canal and deliver their oil to major refineries in Sardinia, specifically at Sarroch and Milazzo, Sicily. This alternative route was more economically viable, especially as it avoided the long journey around the Cape of Good Hope and the Strait of Gibraltar. Consequently, these nations experienced an economic boost from the increased demand for their oil exports.

Long-Term Effects on Trade Patterns

In the short term, the closure of the Suez Canal had significant impacts on global trade. However, in the long term, the effects were limited to a shift in trade patterns rather than a fundamental restructuring of international trade networks. The blockage spurred the development and deployment of Very Large Crude Carriers (VLCCs), which were too large for the Suez and Panama canals. VLCCs emerged during the conflict in the 1970s, driven by economic factors rather than military necessity. These carriers offered substantial economic advantages in terms of fuel efficiency and cost savings from single-voyage deliveries.

Conclusion

The Suez Canal’s closure during the Arab-Israeli wars had both immediate and lasting impacts on international trade. While it temporarily disrupted global trade patterns and increased fuel costs, it also led to the adoption of larger, more efficient vessels and a reevaluation of trade routes. The subsequent development of VLCCs demonstrated that technological and economic factors played a crucial role in shaping the way oil and other goods were transported worldwide.