"Every missile fired, every shipping lane disrupted, every sanction imposed — the supply chain absorbs the cost."
7 min read · February 2026
Good Morning, Good Evening, and Good Night — wherever you're reading this. This month's journal tackles the intersection of conflict and commerce.
There's a comfortable illusion in supply chain management that logistics is a purely commercial discipline — that moving goods from point A to point B is fundamentally a math problem. Optimize the route. Minimize the cost. Maximize the throughput. But February 2026 is a stark reminder that supply chains are, and always have been, extensions of geopolitics.
As I write this, the Russia-Ukraine war is entering its fourth year. Houthi militants continue to threaten commercial shipping in the Red Sea. Tensions across the Taiwan Strait simmer beneath every semiconductor supply chain conversation. And the defense industrial base — the supply chain behind the supply chain of national security — is straining under demands it wasn't built to handle. This month, we examine how active conflicts are reshaping the physical infrastructure of global trade.
The war in Ukraine has become the defining supply chain disruption of the decade — not because of a single dramatic event, but because of its relentless, grinding impact on European energy markets, global agricultural supply, and the defense industrial base. Four years in, the effects have become structural rather than acute. They're baked into how the world trades.
European natural gas prices are running approximately 25% higher year-over-year as the continent continues to wean itself off Russian pipeline gas. The transition to LNG imports from the U.S., Qatar, and Australia is largely complete, but the cost premium is permanent. European manufacturers — particularly in energy-intensive sectors like chemicals, glass, and metals — are operating with a structural cost disadvantage relative to their U.S. and Asian competitors. Some have relocated production entirely. Others have invested heavily in energy efficiency. The ones that did neither are closing.
Ukraine's agricultural exports have partially recovered through the Black Sea grain corridor, but volumes remain well below pre-war levels. The fertilizer market — where Russia was the world's top exporter of nitrogen, potassium, and phosphate fertilizers — has undergone a permanent reconfiguration. Alternative suppliers in Canada, Morocco, and the Middle East have scaled up, but at higher price points. The downstream effect: food production costs globally remain elevated, contributing to persistent grocery inflation that central banks can't directly address with interest rate policy.
The Houthi campaign against commercial shipping in the Red Sea and Gulf of Aden is now the longest sustained disruption to a major trade route in modern history. What began as targeted attacks on vessels with perceived Israeli connections has evolved into indiscriminate strikes on commercial shipping from virtually every flag state.
The numbers are staggering: Red Sea shipping volumes are down approximately 40% from their 2023 peak. Major container lines — Maersk, MSC, CMA CGM, Hapag-Lloyd — have rerouted the majority of their Asia-Europe services around the Cape of Good Hope, adding 10-14 days to transit times and roughly $1 million in additional fuel costs per voyage. Shipping insurance premiums for Red Sea transit have surged over 300%, making the route economically unviable even when militarily feasible.
The rerouting has cascading effects throughout the supply chain. Longer transit times mean more inventory in transit, tying up working capital. Port congestion patterns have shifted — Mediterranean ports that relied on Suez Canal traffic have seen volume drops, while ports in West Africa and around the Cape have experienced unexpected surges. Container availability has tightened as boxes spend more time on water. And the schedule reliability that carriers spent 2023-2024 rebuilding has deteriorated again.
For supply chain planners, the lesson is uncomfortable but clear: maritime chokepoints are single points of failure, and there's no purely commercial solution to a military problem. The Suez Canal handles roughly 12-15% of global trade in normal times. When it's compromised, the entire system adjusts — slowly, expensively, and imperfectly.
Perhaps the most underreported supply chain story of the past three years is the strain on the defense industrial base. The U.S. and its NATO allies have committed billions in military aid to Ukraine, and the defense supply chain was simply not designed for this level of sustained output.
Ammunition production is the clearest example. 155mm artillery shells — the workhorse of conventional ground warfare — were being produced at roughly 14,000 rounds per month by the U.S. in early 2022. Ukraine was consuming that amount in days during peak fighting. Production has ramped to approximately 40,000 rounds per month, with a target of 100,000 by late 2026, but the gap between production and consumption exposed decades of underinvestment in defense manufacturing capacity.
"We optimized the defense supply chain for efficiency in an era of peace. Now we need it optimized for surge capacity in an era of conflict. Those are fundamentally different design objectives."
— Defense industry assessment, February 2026Defense systems depend on rare earth minerals for everything from guidance systems to jet engines to communications equipment. China controls roughly 60% of rare earth mining and 85%+ of rare earth processing globally. This dependency — which has been flagged as a national security risk for over a decade — remains largely unresolved. Mining projects in Australia, Canada, and the U.S. are progressing, but processing capacity outside China is still woefully inadequate. A single geopolitical escalation involving China could compromise the production of virtually every advanced weapons system in the Western arsenal.
Geopolitical conflict creates a persistent risk premium across commodity markets that supply chain teams must price into their models.
If there's a single thread connecting every story in this month's journal, it's the concept of supply chain sovereignty. Conflicts don't create supply chain vulnerabilities — they expose them. Every dependency on a single source, a single route, or a single region is a risk that's invisible in peacetime and catastrophic during conflict.
The reshoring and diversification investments of 2023-2025 weren't just about tariffs or cost optimization — they were about building supply chains that can survive a world where conflicts are the norm, not the exception. The companies and nations that treated supply chain sovereignty as a strategic priority are weathering these disruptions. Those that treated it as an optional expense are paying the premium now.
23 of 32 NATO members now meet the 2% of GDP defense spending target, up from just 7 members a decade ago. That spending is flowing into defense manufacturing, stockpile replenishment, and supply chain resilience. The defense-industrial complex is being rebuilt — not because anyone wants war, but because the supply chain reality of sustained conflict demands it.
"Supply chain strategy and national security strategy are converging. The companies that understand this will define the next decade of global trade."
— Daivik Suresh, February 2026-DAIVIK SURESH-
Supply Chain + Business Analytics Enthusiast · February 2026Not financial advice. All opinions are personal. Investing involves risk including potential loss of principal.