The escalating military conflict between Israel and Iran has reached a critical juncture, with Iran’s parliament voting to close the Strait of Hormuz in response to U.S. military actions on 22nd June 2025.
This potential closure of the world’s most vital energy chokepoint threatens to disrupt 20% of global oil and LNG trade, creating cascading risks across pharmaceutical manufacturing, logistics, and supply continuity.
This PharmaSource briefing provides a strategic assessment of potential impacts and actionable mitigation strategies.
Strait of Hormuz: What’s at Stake
The Strait of Hormuz represents far more than a regional shipping lane—it’s the primary artery through which global energy flows. Any disruption would immediately reverberate through interconnected supply chains, hitting pharmaceutical operations through multiple vectors.
Critical Statistics:
- 20 million barrels of oil per day (~20% of global petroleum) transits through this 21-mile-wide strait
- 84% of exports from this route supply Asian markets, including India—the world’s pharmacy (Source: EIA)
- India receives ~40% of its crude oil via Hormuz, directly impacting generic medicine production
“The Strait of Hormuz is, at the end of the day, the artery through which the world’s energy flows, and if that artery is blocked… it’ll have a huge impact on global trade.”
— Wael Sawan, Shell CEO
Iran’s Pharmaceutical Landscape: Direct Impact Assessment
Whilst Iran isn’t a major API exporter to Western markets, its domestic pharmaceutical sector demonstrates substantial self-sufficiency with broader regional implications:
Domestic Production Capacity:
- Iran’s Food and Drug Administration (IFDA) oversees 347 pharmaceutical enterprises producing approximately $1.8 billion worth of medicines (2021)
- 99% of domestic medicines produced locally, with exports reaching 40 countries globally
- Strong import substitution: imports represent only ~1% of medicines by volume (13% by value)
Strategic Dependencies: Despite high domestic production levels, Iran remains dependent on foreign sources for critical raw materials, particularly active pharmaceutical ingredients (APIs) imported from India, China, and Europe. This creates a vulnerability pathway where Strait of Hormuz disruptions could impact Iran’s own pharmaceutical supply chains through energy costs and logistics constraints.
Risk Assessment: The primary threat to global pharmaceutical markets lies not in direct Iranian pharmaceutical imports, but in the cascading energy and petrochemical disruptions that would affect manufacturing costs and supply chains worldwide.
Supply Chain Impact Analysis
“I encourage the Chinese government in Beijing to call them (Iran) about that, because they heavily depend on the Straits of Hormuz for their oil.”
— Marco Rubio, United States Secretary of State
Closing the Strait of Hormuz could have the following effects:
Energy & Manufacturing Costs
Oil prices could surge to $100-$150 per barrel, dramatically increasing:
- Electricity and HVAC costs at manufacturing facilities
- Transportation fuel for logistics networks
- Energy-intensive processes in API synthesis
Raw Materials & APIs
- Petrochemical feedstocks for pharmaceutical synthesis face immediate disruption
- Indian API manufacturers—supplying ~40% of global generics—experience cost pressures
- Solvent availability becomes constrained, affecting multiple manufacturing processes
Packaging Materials
- Resin shortages impact plastic packaging production
- Polymer, glass, and aluminium costs escalate rapidly
- Primary packaging delays create bottlenecks in finished product availability
Logistics & Distribution
- Route diversions via Africa add 10-14 days to shipping times
- Marine insurance premiums increase substantially
- Air freight capacity becomes strained as companies seek alternatives
Recommended Actions
The potential closure of the Strait of Hormuz represents a systemic risk to global pharmaceutical supply chains, extending far beyond regional geopolitical concerns. Whilst Iran itself isn’t a major pharmaceutical supplier to Western markets, the energy and petrochemical disruptions could fundamentally alter cost structures and supply reliability across the industry.
Pharmaceutical executives are recommended to implement comprehensive risk mitigation strategies, focusing on supply diversification, inventory enhancement, and strategic partnerships.
- Conduct tactical audits: Flag all SKUs vulnerable to Gulf-sourced materials or Hormuz-dependent logistics
- Activate supplier contingency plans: Prequalify alternate feedstock/API vendors outside the Gulf corridor
- Enhance inventory strategy: Shift from transactional to strategic buffer holdings (60+ day targets)
- Re-route logistics: Negotiate contracts through safe corridors, mindful of insurance costs
- Monitor developments: Establish energy and shipping intelligence networks
- Engage regulators and payers: Discuss potential pricing/supply volatility and mitigation strategies
“Know your supply chain”
Speaking at CDMO Live 2025, Ryan Kelly Senior Director of Supply Chain Security and Brand Protection at Rx-360 explained how pharma companies should be ready for these type of events.
“Know your supply chain. Make sure you have it well mapped. Know who your suppliers are, their secondary suppliers and what your alternative options are. The biggest thing that we’ve seen coming out of COVID was investments in technology to help traceability and transparency into the supply chain. “
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