War, Oil, And Supply Chains

Oil jumps, ships stall, and a regional war starts rewriting the rules of global trade. We follow the Iran conflict from the headlines into the real economy, where the Strait of Hormuz becomes a pressure point for energy logistics, freight capacity, and consumer prices. As Brent crude spikes and markets slide, we ask the uncomfortable question: is the US paying the bill while others quietly advance?

We also look at the second-order effects that supply chain leaders can’t ignore. China and Russia appear positioned to benefit from distraction and higher energy revenue, while tariff volatility and retaliation add another layer of uncertainty to sourcing, compliance, and planning. We talk through the emerging patchwork of trade deals, attempts to reform the World Trade Organization, and what “fragmentation” actually means when you’re trying to move goods across borders on time and on budget.

Then the lens tightens on power and control in technology. The Anthropic fight with the Pentagon raises hard questions about AI ethics, safety guardrails, and what happens when government pressure collides with private AI policy. From there we unpack agentic AI in supply chain management: autonomous decision-making in procurement and manufacturing, the data governance problem of multiple sources of truth, and the new cybersecurity attack surface that comes with AI agents acting inside operational systems.

If you care about supply chain resilience, geopolitics, tariffs, energy security, and the future of AI in operations, this one connects the dots. Subscribe to Chain Reaction, share the episode with a colleague, and leave a review. What risk feels most underestimated right now: shipping chokepoints, trade fragmentation, or agentic AI autonomy?

Read the article referred to in the episode here: https://wp.me/p7A9ob-1gk

Transcript

Welcome And Quick Setup

Speaker 1 0:00

Welcome to Chain Reaction. Let's get to business.

Middle East Escalation And US Aims

Tony Hines 0:30

Hello, Tony Hines here. Great to have you along. Thanks for coming by. Well, we're gonna go straight to the news roundup. And guess where we're starting? Yeah, you guessed it. We're gonna pick up on what's happening with the trouble in the Middle East. Well it seems we can't go twenty four hours without President Trump making some statement or other, most of which we can't trust, or we don't have any faith in because he says so many different things. He's very unclear on what the objectives are for the United States in the Middle East, and he doesn't seem to have any idea of how to get out of it. The latest wheezy just says he wants his allies to go and get oil from the Middle East. Easier said than done, isn't it? Who's gonna send their ships in? Who's gonna get that oil out? Didn't he think this through before he started this whole episode? It's probably one of the biggest follies in world history. I'm sure it'll go down in history. He likes these things that are the biggest something ever. Well this is one of those, and I'd call it the biggest ever folly. Almost, maybe. Did I really say that? Perhaps so.

Speaker 1 1:48

Welcome to Chain Reaction. Welcome to Chain Reaction.

China And Russia As Winners

Oil Shock And Market Selloff

Inflation And EV Market Whiplash

Anthropic Versus The Pentagon

Tony Hines 2:00

Subscribe to Chain Reaction. You'll be first to know when new episodes are out, and you'll never miss an episode. When it comes to the real winners from the Iran War, we'll probably see China and Russia leap ahead. Because they're quietly sitting back, not incurring any cost, but actually Russia's probably making money now with the oil crisis, and China of course is just pressing ahead with its own agenda, not distracted by wars. So if President Trump really did want to make America great again, is this really the right way to go about it? I don't think so. And I'm not alone. Of course, once you've taken the genie out of the bottle, how easy is it to put it back in? Many have done that, and many have tried, and many have failed. And that's the dilemma right now, of course. Where do you go from here? And we've been looking at this. We're only five weeks in, six weeks coming up, and we've got a problem. The Economist has a good article on how China hopes to win from the war this weekend. And it quotes Napoleon Bonaparte's maxim which was never interrupt your enemy when he's making a mistake. And certainly that's what Beijing seems to be doing. They seem to be standing aside and just letting the war play out. They're not getting involved, they're not saying too much, they're fairly tight lipped about it, but they understand when a mistake's a mistake, and they're likely to benefit from the prosecution of that mistake. In China they think that this will accelerate America's decline. It's a validation in many ways of President Xi Jinping's focus on security over economic growth. China expects peace, and they know a peaceful world is better for their interests. President Putin is putting himself forward at the moment as a broker of peace. Strange turnaround that one. But President Putin is also a big beneficiary of this war. Russia is currently taking in about five billion dollars every month because of the sanctions lifted on their oil. China of course always plays the long game. They will sit back, they'll wait, and they'll get their own agenda the way they want it. President Trump thinks he's fairly smart and he's good at deals, but the evidence doesn't support that. When you look at how he's behaved over the past year, then make America great again is actually making America weak. And China knows this. They'll bide their time and they'll make a play for Taiwan at some state in the future, when the United States is at its weakest. Israel, meanwhile, is making its own play, a power play to be dominant, the dominant force in the Middle East. Will they at some stage broker deals with some of the other Gulf states? Or will they simply wish to obliterate Lebanon and Iran? They seem happy to do that now. US oil prices for petrol have gone over four dollars per gallon. Back in January they were under three dollars. So that's up about twenty five percent. Of course President Trump says America's got plenty of oil. So if there is plenty of oil in America, why has it gone above four dollars? Are they arguing that they're not affected by it? Well they are, of course. The evidence is there to see. Oil prices have had the biggest monthly increase ever. Brent crude hit one hundred and nineteen dollars a barrel. That's a rise of about sixty three percent since the start of the Iran war. And the blockage in the Strait of Hormuz is causing a lot of problems to get that oil where it needs to be. Stock markets have had their worst quarter since twenty twenty two, and the indices are down five to eight percent. The Hang Seng in fact dropped by seven percent, and Japan's topics by eleven percent. The MSCI emerging markets index thirteen percent. So big falls. There's a lot of speculation going on presently as well, and of course while we talk about all the doom and gloom, there are some people making hay while the sun shines with all the disruption. They're playing the markets, they're making gains, and some of those gains are rather big. Eurozone's annual inflation rate surged in March to two and a half percent, previously one point nine percent in February. The European Central Bank has a two percent target. These bank targets are just unrealistic in the current situation. Energy prices are nearly five percent higher than a year ago, and in February they had decreased by three point one percent. BYD's annual profit fell by a fifth amid a savage competition war. China's EV market under pressure. It was their first profit drop in four years. But the price of these stocks since the start of the Iran war has increased. Investors see the conflict will result in a shift in the industry for cars away from petrol towards electrification. They see this probably being a great Phillip for the electric car industry. The memory chip sell off continues. Stocks of companies selling memory chips are being sold. This could affect their investment plans, and if it does, then we're likely to see more shortages. There was an interesting episode in the past week where a federal judge issued a temporary block on the designation of anthropic as a supply chain risk. The Court of Appeal in Washington, DC will rule shortly on the matter in a separate case. So what's the problem with anthropic? Well a supply chain risk. What does that mean? Well the short answer is that the Pentagon labelled anthropic a supply chain risk, not because of espionage or foreign ties, but because of a policy clash. Anthropic refused to let the United States military use its clawed AI system for mass domestic surveillance, or fully autonomous lethal weapons. The Pentagon wanted unrestricted use. Anthropic said they wanted safety guardrails, and there is a disagreement which escalated into an unprecedented, punitive designation. Anthropic refused military uses which it considered unsafe. Anthropic prohibited the use of mass domestic surveillance of Americans and fully autonomous weapons capable of selecting and engaging targets without human oversight. The Pentagon said they wanted the right to use Claude for all lawful purposes without any restriction. And so the policy of Anthropic stood, and the Pentagon retaliated with a supply chain risk designation when they refused to remove its safety limits. They said it was a supply chain risk, they ordered agencies to stop using Claude, and they threatened contractors that they couldn't work with them if they used anthropic. They usually do this and use this punitive measure if it's a foreign adversary. They did it with Howei, for example, the Chinese telecoms company. Anthropic is sued, and a federal judge blocked the Pentagon's action. So that's what's happened with Anthropic. The government likely violated the First Amendment and due process rights. The designation appears Orwellian and punitive rather than security driven. It's the first time, of course, that the United States has used this designation against an American AI company, and it raises big questions about AI ethics versus military authority. It shows how AI and the safety stances and the policies they put in place can become geopolitical flashpoints. The courts signaled that the government may have overreached the number one voice in the action of supply chain advantage, global trade and policy.

One Year Of Tariff Chaos

Speaker 11:25

Welcome to Chain Reaction. Yeah. We smart who shape the economy.

Hormuz Chokepoint And Shipping Crisis

Retaliation And A Fragmenting Trade Order

The Kit Kat Logistics Heist

Agentic AI Meets Supply Chain Reality

Wrap Up And Share Request

Tony Hines 11:35

Well I was reminded this week we hit April the first. And it was a year ago exactly when Donald Trump stood in the rose garden of the White House and unveiled his tariff schedules on the world. Do you remember all those boards he held up and all the nonsense that surrounded it? And how people were critical of the way he calculated it? He was just picked out the air. And he penalised countries he didn't like, so he says. And the countries he did like he gave them slightly less tariffs, and it was all going to make America fantastic, and it was all going to be a big revenue driver for the United States. Well how did that work out? Not very good, I don't think. It's hit hard, it's caused disruption around the globe. It's slowed global trade. It's hit American companies hard. People scurried around trying to secure supplies at the time, and it was like an April fool. Only who was the fool in this April Fool? I'll let you work that one out. And it was a massive problem for lots of businesses. Of course the big businesses can withstand this because they're global and they just move stuff around and they're able to manipulate. But even some of those bigger companies were caught short and very unawares by some of the nonsense, shenanigans, call it what you will, that was unleashed by the president. And all in the aim, so he says, or the spoken aim, of making America great again, and getting all those tariffs in from all those countries that had ripped off the United States. Well, here we are a year later. He's had to backtrack several times with his threats. Lots of the threats are idle. I always think of President Trump now, like the boy who cried Wolf. I don't believe anything he says, and I just wait and see. And actually there's lots of backtracking, and there's lots of manoeuvre and manipulation, and you just wonder does he wake up in the morning and want to upset everybody in the world? Maybe that's his aim in life, I don't know. It all appears chaotic. There's not much rational thought in these processes. If you were rational, you'd be looking for ways to cooperate, innovate, and change things for the better. But the policies that have come out of the United States over the past year have been very destructive. And the irony is that they've been problematic, challenging for American companies, not just for everybody else. Which I think was the intention. The intention was to make Americans better off. But Liberation Day, well, it was more like strap everyone down day and pick the pockets through the tariffs. It's been quite a volatile period. And when we look back in the history books and we look at this period of American policy towards the rest of the world, I don't think it will read well. A recent poll in the United States only had twenty-eight percent in favor of the attack on Iran, and I think it was something like fifty-eight percent were against, and the rest were don't know or don't care. The US Iran conflict has choked one of the world's most critical maritime arteries. Daily vessel transit dropped from one hundred and fifty to just four or five, freight rates are up nearly five fold, war risk insurance is up ten times. About two thousand ships and twenty thousand seafarers are stranded. This is the most severe choke point disruption since the sewers blockage. Remember that when the Evergiven got stuck in the Sewers Canal, with long term implications on this one for energy, manufacturing and global routing strategies. Is it going to get better anytime soon? Well we don't really know. It doesn't look like it at the moment. Key Gulf Air ports are closed or restricted in Kuwait, Bahrain, and Qatar. Hormuz is effectively closed, and Red Sea instability continues, as the Huji rebels are starting their actions again in support of Iran. Transit times have been extended by fourteen to twenty one plus days. Emergency surcharges are widespread. And Iran is charging ships to go through that strait. This is looking like a structural shock, it doesn't look like a temporary blip. The president is trying to talk it away by saying it's only temporary, it'll all get back to normal. It'll open up again when the war stops. But will it? Will it open up? Will oil flow again? People are saying expect long term rerouting, higher costs, and multimodal diversification. The one thing I think it will do is push people to search for other sources of energy. I reckon President Trump, although he doesn't like climate change and talk of green energy, doesn't like windmills. I guess he's probably done more for the development of new sources of energy than probably anybody else. Whether he'll like that accolade or not, I don't know. But he probably has, because it will probably drive people through necessity to search out new sources of energy. And so we can expect big shifts in the way in which oil suppliers operate in the next five to ten years, and the replacement of those traditional sources of energy with green energy. China has launched its own probes into US trade practices, and this is a mirroring action of the US Section three hundred one investigations into sixty countries. So it's part of the tit for tat policy. United States does something. China hits back. And they do it perhaps a little more subtly. EU US trade deal advances. Despite tariff volatility, EU lawmakers moved forward with the Turnbury Agreement. The US maintains its fifteen percent tariff on many EU imports, but the EU has removed tariffs on key US goods. The Middle Power Coalition is seeking to save or rebuild the World Trade Organization. It's led by Mark Carney, the European Union and CPTPP nations. They're preparing a plurilateral reform pact. Just means many of them involved. And it could form the basis of a new rules based trading order if the WTO consensus were to fail. That was reported by Politico this week. We're seeing the emergence of many parallel trade agreements and a fragmentation of global governance with new blocks forming around digital trade, energy and tariffs. And it's all getting a bit messy. Now if you want to take a deeper look at what's happened to US policy over the past year, since President Trump has come back as president, then you should drop by the chain reaction review site, and you'll see there I have an article on what I think has happened over the past year. And I think you'll find it interesting if you take a look. I'll put it in the notes, and you can drop by at leisure and have a read. Now when we have a cup of tea in the United Kingdom, we'll often have a biscuit. And so it caught my eye this week when we looked at Kit Kats. There were something like two and a half million, I think it was actually two point four million Kit Cats that vanished in Europe. It was a logistics heist. A truck carrying twelve tons of Kit Cats disappeared en route from Italy to Poland. I wonder if they now need the tea to go with that. They might want to keep an eye on those tea lorries over the next week or two. Cargo theft in Europe is more common than many realise. Thieves may not have known what they were stealing due to the unbranded trailers. Nestle says supply is unaffected and bars can be traced via batch codes. Cargo theft is rising across EU corridors, and it's a reminder of physical security vulnerabilities in FMCG and retail supply chains. We don't often give much thought to that, but it's uh it's a growing problem. Now in recent weeks I've read quite a few stories about agentic AI and how it's moving from hype to operational reality, and it's exposing deep structural weaknesses in supply chains. Agentic AI refers to systems that don't just analyze or recommend, they reason, plan, and take autonomous action within guardrails, and this is a shift from AI as a dashboard to AI as an operator. Three big themes stand out when we look at this more deeply. The first is we're moving away from chatbots to autonomous decision makers. Industry leaders say over the last two years it's all about experimenting with generative AI, but the next two years will be about operational discipline. Companies are no longer asking what AI can summarize, they're asking what it can decide. Agentic AI can orchestrate workflows, trigger transactions, and reconcile data across fragmented systems. But supply chains, as we all know, can be messy, distributed, and highly regulated, and that makes autonomy difficult. Why does this matter? Well, supply chains are decision systems, not content systems. Agentic AI is the first wave of AI that can actually act without humans. The second thing, the data paradox. Context is everything. Executives repeatedly emphasize that data brittleness becomes existential when AI agents take action, rather than just provide insights. Same model plus same data volume can give widely different outcomes depending on context. Poorly contextualized inputs can propagate errors across planning, procurement and customer communication before humans intervene. Many project pilots failed because ERP, TMS, and VVMS and customer systems couldn't align well enough to support autonomous decisions. Agentic AI is exposing the fragility of multiple sources of truth. Multiple sources of truth in supply chains means that different systems are holding different versions of the same data, and none of them fully agree or fully align. And it happens because supply chains are built on legacy ERP, built on modules, spreadsheet management, supplier portals, TMS, WMS systems, planning tools, finance systems, CRM platforms that don't speak to each other and don't cross over with the same data. The principle was always enter something once and it should be everywhere. But that hasn't really worked in lots of these systems. And that's because the vendors quite often are selling their systems with we have all the answers as their prime driver. And of course, they may not do. And they don't join up and link together as they should do. So multiple sources of truth can be a big problem when we start to use agentic AI. Without strong data governance, autonomy becomes dangerous. And the third thing, there's broad agreement that humans won't disappear, but disagreement about where they should sit in the loop, humans in the loop is becoming a design principle. Some leaders want humans approving every agentic action. That seems to be defeating the objective. Because you might as well just do it with people rather than use agentic AI. The whole purpose of agentic AI is to make better decisions, but do it faster. Others want human only for exception. Everyone agrees that autonomy without guardrails is risky. The question is no longer can I use AI to make decisions, but when should I use AI without getting involved? That's the more important question. Procurement is emerging as a major agentic AI use case. End to end lifecycle execution, intake sourcing, contracting, onboarding and P2P, intelligence escalation only when needed, and faster cycle times and improved compliance. Procurement is a perfect test bed for agentic AI. It has structured workflows, high data volume, and clear rules. Manufacturing too is using agentic AI. A Deloitte study shows manufacturers are adopting agentic AI to monitor geopolitical events, tariffs and weather disruptions. Well, some might say good luck with that one. It's a difficult thing to do, because it's a rational decision maker. And how does it take it into account the irrational in the process? And as we know, there are irrational people making some of those decisions. Evaluate bills of materials at component level, automatically initiate supplier switches, reduce cycle times and free humans up to do strategic work. It's the first time that AI can autonomously reconfigure supply chains in response to shocks. It's an interesting concept. I'd be interested to see how that one plays out. And of course, when it comes to security risks, agentic AI is quite a useful tool. But at the same time, agentic AI doesn't just use software to make those decisions in supply chains. It's acting inside them. And this expands the vulnerability and the attack surface dramatically. It means that systems could become more vulnerable to attack. Some of the key problems rogue agents, poison data, lack of guardrails, and agents refusing to shut down. Agentic AI is exposing system weaknesses that we've been talking about on chain reaction for some time. Fragmented data, siloed systems, lack of a single source, over reliance on human patching, poor governance and other vulnerabilities. The technology is ready, but the systems aren't there yet. It's a perfect moment to give some thought to how agentic AI might affect your organization, your business, your global trade, or your policies. Well that's it for this week's discussion and news roundup. I hope you've enjoyed the episode, and I hope you'll come back next time and listen to Chain Reaction. In the meantime, don't forget to tell others and share the episode. And don't forget to pick up any episodes you've missed by dropping by the Chain Reaction website. I'm Tony Hines, I'm signing off, and I'll see you next time. Until then, take care. Bye for now.

Speaker 28:39

Welcome to Chain Reaction. You're etching every transaction. The number one voice in the action of supply chain advantage. Global trade and policy. Welcome to Chain Reaction. The smart moves shape the economy. You've been listening to the Chain Reaction podcast, written, presented, and produced by Tony Hines.