The first few weeks of 2025 have been so utterly chaotic, that the only safe bet when it comes to predictions for the rest of the year seems to be “more chaos”. Despite glimmers of hope for stability, geopolitical events continue to unfold around the world that promise continued disruption throughout the year.
According to a new report by interos.ai, there are 481 distinct companies in the S&P 500 that have direct suppliers located in “high-risk regions.” Organisations with ties to the agriculture, building and civil engineering, retail and computer manufacturing industries are particularly prone to disruption. The report argues that, even if only 10% of combined annual revenue is impacted from supply chain ripple effects in high-risk regions, the resulting impact could be more than $1 Trillion across the world’s largest companies.
The result of such disruption could, according to the report, include “widespread disruptions to global technology production, surging prices in consumer electronics, commodity price increases in energy, raw material and agricultural markets and increased costs in global shipping, fostering for consumers worldwide.”
The report’s analysis of high-risk zones focuses on three key regions: the Red Sea, Eastern Europe, and the South China Sea.
A momentary reprieve for Gaza and the Red Sea hangs by a thread
After 15 months of slaughter, ethnic cleansing, and bombardment with US and British-made weaponry, Israel’s assault on the Gaza Strip has reached a tentative pause with the announcement of a ceasefire. A conservative estimate puts the Palestinian dead in excess of 45,00 people, over half of whom were children.
The deal, which hopes to see a pause to the fighting, the staggered release of Israeli hostages and Palestinian prisoners, and an influx of aid to Gaza, has already seen some positive effects. These include the easing of Houthi sanctions on shipping in the Red Sea and the release of the crew of the part-Israeli-owned passenger ship, the Galaxy Leader which they captured in 2023. Throughout the devastation in northern Gaza, Palestinian refugees are starting to return home.
However, a series of settler raids in the West Bank — emboldened by the lifting of sanctions against illegal settlements by the incoming Trump administration — are already threatening to reignite the conflict. President Trump also echoed the sentiments of his son-in-law Jared Kushner, who is investing in stolen land in Gaza, calling the area a “phenomenal location” for real estate investment. That probably isn’t helping.
Also, Israel’s seizure of land from neighbouring countries, including Yemen, and sustained airstrikes against its neighbours continues to stoke the conflict. The reignition of the genocide in Gaza, escalating violence in the West Bank, and worsening conflict on Israel’s borders could mean — in addition to more loss of life — further disruption to global trade routes.
What’s next for the red sea?
Over 10% of global trade passes through the Red Sea, including 30% of global container traffic, and over $1 trillion in annual merchandise. Interos.ai’s report notes that Houthi attacks on commercial ships in the Red Sea caused revenue in Egypt’s Suez Canal to drop by almost 50% ($428 million in Jan 2024 down from $804 million the year prior) — something US and British warships patrolling the waterways have done almost nothing to contain.
To mitigate risk, shipping organisations have spent the past year re-routing vessels around the Cape of Good Hope in Africa. This demands “complex and time-consuming logistics coordination”, as well as increasing fuel costs by around $1 million per voyage, spiking CO2 emissions, and lengthening shipping time by 13-15 days. The return of more ships to the Red Sea could ease these pain points, but things could just as easily go back to how they were.
Ukraine is still a conflict zone
The war in Ukraine passed its 1,000th day recently and, despite assurances by President Trump that he will resolve the conflict in the near future, further disruption in the region seems likely for the foreseeable future. Trump has spoken out in the past few days to pressure Russian President Vladimir Putin with more sanctions if he does not end the war.
President Putin has said that he is willing to end the decade-long conflict under terms that Ukraine accept Russian territorial gains, which currently represent around 20% of its land. He has also refused to entertain peace talks if Ukraine is allowed to join Nato following an end to hostilities. Ukraine has refused these terms, although more recently President Volodymyr Zelensky conceded that the country may have to cede some currently occupied land temporarily.
Interos.ai notes that US and European sanctions against Russia have “vastly reshaped global supply chains” since Russia’s invasion of Ukraine. The conflict has radically altered the energy, agriculture, shipping, logistics and global payment sectors.
The looming threat over Taiwan
Last year, interos.ai notes in its report that there were more than 3,000 flyovers in Taiwanese airspace by the People’s Liberation Army. While considered less of an inevitability than before the pandemic, a Chinese invasion of Taiwan “would plunge technology supply chains into chaos and the world into war.”
Taiwan is critically linked to global technology supply chains, producing over 90% of the world’s advanced semiconductors. Conflict in the country would derail the production of phones, laptops, medical devices and server networks that underpin global industries and vital digital infrastructure.
More broadly, the report also notes that, with more than 20% of global trade (about $3.4 Trillion) passing through the South China Sea, ongoing geopolitical tensions between states like China and the Philippines could disrupt major shipping and trade routes in 2025.
How can supply chains respond?
“Businesses must evolve from in-house techniques and reactive risk management to a proactive approach that prioritises resilience,” Ted Krantz, CEO of interos.ai, said in a press release. “Supply chains are the bedrock of the global economy. But can also bring the world to a screeching halt. Eliminating risk in supply chains should be one of the enterprise’s strategic board charters in 2025.”
Whatever 2025 holds for the world and its supply chains, organisations need to be ready to face it, and one of the first steps is increasing supply chain knowledge and involvement at the board level. McKinsey’s Global Supply Chain Leader Survey from 2024 highlighted a board level strategic gap, where only 30% of members had a deep understanding of supply chain issues. The report accused companies of “taking their foot off the gas” when it came to resilience, with just 25% of boards having formal processes in place to discuss supply chain risks.
- Risk & Resilience
