Regional QHSE & Compliance Manager – Americas

Dear Valued Customer,

Following our previous communications, we are providing a further update on the geopolitical situation in the Middle East and its continued impact on global air and ocean supply chains. The overall situation remains fragile and security-driven. While air freight is showing gradual recovery, the ocean environment continues to face elevated risk exposure and sustained operational disruption.

Air Freight – Capacity Recovery Update

Middle Eastern carriers continue to progressively restore operations:

• Freighter capacity is now close to 100% restored
• Passenger flight schedules have recovered to approximately 75% of normal levels

This is supporting improved regional connectivity and increasing available capacity. However:

• Fuel costs remain elevated
• Emergency and fuel-related surcharges remain in place
• Cost normalization is expected to lag behind capacity recovery

Ocean Freight – Elevated Risk Environment

From an ocean perspective, no improvement has been observed, and the overall environment remains highly sensitive and security-driven.

• The Strait of Hormuz continues to represent a critical and high-risk maritime corridor
• Carriers maintain restrictive routing strategies and heightened operating caution
• Insurance, war risk, and security-related requirements remain elevated and continue to fluctuate at short notice

While key regional ports and alternative gateways remain operational, the broader environment continues to require cautious navigation and careful planning due to ongoing geopolitical uncertainty.

Operational Impact and Global Ripple Effects

Operational constraints remain consistent:

• Continued congestion across alternative hubs
• Feeder and inland bottlenecks
• Ongoing delays in port handling and container evacuation

Additional downstream effects are becoming more visible:

• Increased pressure and delays across global trade corridors
• Rising costs for alternative routings
• Continued schedule disruption and equipment imbalance

Broader Supply Chain Implications

The situation is expected to have prolonged global consequences, including:

• Disruption to energy and related supply chains
• Impact on petrochemicals, plastics, and industrial raw materials
• Exposure across key commodities originating from the Persian Gulf

These dynamics are expected to result in:

• Supply shortages in certain sectors
• Longer lead times
• Continued upward pressure on costs

What This Means for Your Shipments

Customers should continue to plan for:

• Extended and less predictable ocean transit times
• Elevated risk across Middle East-related trade lanes
• Gradual improvement in air freight capacity
• Sustained cost pressure from fuel, security, and operational surcharges
• High volatility depending on further geopolitical developments

Pentagon Guidance and Support

Pentagon remains fully mobilized globally to support your operations:

• Securing air capacity as recovery continues
• Managing ocean shipments via alternative and controlled routings
• Monitoring developments in real time through direct carrier engagement
• Supporting contingency planning and supply chain adjustments

We recommend that customers:

• Book early and plan proactively
• Maintain flexibility on routing and transport mode
• Share updated forecasts regularly
• Review insurance coverage, including war risk provisions
• Stay in close coordination with Pentagon teams

While air freight is showing encouraging signs of recovery, the overall environment remains highly volatile and operationally constrained, particularly on the ocean side. The current situation reinforces the expectation of prolonged disruption with broader global impact, despite continued operational availability across key regional hubs.

Pentagon will continue to monitor developments closely and provide further updates.al Situation

Your supply chain continuity—and the safety of our people—remain our top priorities.

Yours Sincerely,

Pentagon Middle East & India Management Team

Dear Valued Customer,

Following our previous advisories, we are providing an updated and consolidated view of the ongoing geopolitical situation in the Middle East and its continued impact on global air and ocean supply chains.

While a ceasefire remains in place, it is fragile and subject to change at short notice. A second round of U.S.–Iran negotiations is currently on hold, and the naval blockade in the Strait of Hormuz continues. Overall, the situation on the ground can be characterized as tense but currently stable, with no indication of immediate normalization. What began as a regional disruption continues to drive broad and uneven impacts across global supply chains and network recovery.

Security Developments and Operating Environment

Recent vessel-related incidents and continued military posturing confirm that elevated security risks persist across the region. Control, rules of engagement, and enforcement remain inconsistent, sustaining uncertainty for commercial operations.

Key considerations:

• Neutral ownership, flag, or cargo type does not eliminate operational risk
• Carriers continue to operate under heightened security and insurance constraints
• Routing decisions remain conservative pending sustained and verifiable stability

Strait of Hormuz – Transit Conditions

Transit through the Strait of Hormuz remains technically possible but highly restricted and conditional:

• Navigation remains limited to narrow corridors, materially increasing operational and insurance risk
• No formal easing of war-risk or navigational restrictions has been communicated by authorities, carriers, or insurers
• Industry and security sources continue to caution that normalization may take months, even under de-escalation scenarios

Carriers therefore maintain a heightened risk posture, with conservative routing strategies still in effect.

Trade Flows and Routing Adjustments

Cargo continues to move into the Middle East via alternative and indirect routings:

• Jebel Ali–bound cargo
  • ~70% routed via Khor Fakkan
  • ~30% routed via Sohar

• Saudi Arabia (Dammam and Riyadh)
  • Routed primarily via Jeddah Islamic Port and King Abdullah Port

• Upper Gulf cargo
  • Increasingly routed via Jeddah and King Abdullah Port, particularly for shipments from Europe and the United States

These routings remain operationally viable but continue to add complexity, transit time, and cost.

Market Situation – Middle East

• Estimated recovery levels
  • UAE: ~70%
  • Saudi Arabia: ~60%

• Weekly vessel capacity currently
  • ~18,000–20,000 TEU across the region
  • Compared with pre-crisis levels of ~100,000 TEU

• Feeder capacity constraints
  • End-of-voyage requirements and transshipment dependencies continue to place significant pressure on feeder networks
  • Notable congestion persists on Indian export corridors, particularly from Mundra and Nhava Sheva into the Middle East

Hinterland and Port Operations

Congestion and operational constraints persist across key alternative gateways:

• Khor Fakkan
  • Sustained high utilization
  • Potential delays of 7–10 days
  • Export and empty container restrictions in effect
  • Emergency Operational Recovery Surcharges applied
  • Inland ICD redirections (e.g., Sajaa, Mleiha) used to ease truck congestion

• Sohar and Salalah (Oman)
  • Ongoing yard congestion and multi-day waiting times

• Jebel Ali
  • No material congestion, but significantly reduced throughput
  • Backlog management supported via rail and transloading through Khor Fakkan
  • Restrictions remain on reefer and dangerous goods cargo

• Jeddah and King Abdullah Port
  • Congested, absorbing diverted Upper Gulf volumes

As a result of these conditions, export shipments are becoming increasingly challenging, particularly where feeder and inland coordination is required. No new acute global congestion hotspots related to the Middle East have been reported in the past 24 hours; however, diversion-driven pressure continues at alternative gateways.

Emergency Bunker Adjustment Factors (EBAF) and Cost Environment

Two carriers have recently implemented additional increases to their Emergency Bunker Adjustment Factors (EBAF). Fuel cost pressure remains elevated. While a modest softening in oil prices has been observed, fuel-related volatility is expected to persist. Emergency bunker, fuel, security, congestion, and operational surcharges therefore remain in place and may continue to evolve.

Air Freight – Capacity and Cost Update

No material adverse developments have been reported on the air freight side.

• Middle Eastern carriers continue to progressively restore schedules, additional carriers commenced services into UAE and Qatar.
• Bahrain, Kuwait and Iraq airports now operational with limited services
• Regional connectivity continues to improve, supporting gradual capacity recovery

Despite these positive developments:

• Fuel costs remain elevated
• Emergency and fuel-related surcharges persist
• Cost normalization is expected to lag capacity recovery

What This Means for Your Shipments

Customers should continue to plan for:

• Delays, diversions, and revised routings
• Schedule volatility driven by backlog clearance and vessel repositioning
• Additional surcharges, including inland-related adjustments
• Ongoing network imbalance and elevated cost levels during recovery

Pentagon Mitigation Measures and Customer Guidance

Pentagon remains fully mobilized globally to:

• Monitor developments in real time through direct carrier engagement
• Secure capacity for critical and time-sensitive shipments
• Deploy alternative and multimodal routing solutions where viable
• Support backlog management and recovery planning

We recommend that customers:

• Share updated forecasts regularly
• Confirm bookings as early as possible
• Review insurance coverage, including war-risk terms
• Maintain flexibility in routing and transit expectations
• Plan for continued variability in lead times and costs

We strongly encourage close coordination with your Pentagon/JAS account representative to assess shipment-specific risks, routing alternatives, and cost implications. While some gradual progress is visible, the situation remains highly dynamic, security-driven, and operationally constrained. Network recovery will take time as conditions stabilize and systems rebalance.

Pentagon will continue to monitor developments closely and provide further updates.

Your supply chain continuity—and the safety of our people—remain our top priorities.

Yours Sincerely,

Pentagon Middle East & India Management Team

Dear Valued Customer,

Following our previous Customer Advisories, we are providing an updated consolidated view on the ongoing geopolitical situation in the Middle East and its continued, critical impact on global air and ocean supply chains.

Recent geopolitical developments, including a ceasefire framework and ongoing diplomatic engagement, have introduced early signs of potential stabilization. However, the operational environment remains highly volatile, constrained, and far from normalized. Direct discussions held this week with multiple top global ocean carriers confirm that the situation on the ground remains extremely fragile, and the coming days will be critical in determining the direction of recovery.

What initially evolved into a regional disruption has become a global supply chain crisis, and the industry is now entering a complex recovery phase, characterized by backlog clearance, network imbalances, and continued uncertainty.

In parallel, active negotiations are currently underway between Iran and the United States aimed at de-escalation. While these diplomatic efforts are being closely monitored, it is important to note that:

• The maritime security restrictions and blockages currently in place remain officially in effect
• There has been no formal or binding easing of navigational risk status communicated to carriers or insurers
• There are potential spillover risks, including threats of disruption or attacks impacting additional ports and maritime infrastructure across the broader Gulf region

As a result, carriers and logistics operators remain in a heightened risk posture, maintaining conservative operational and routing decisions until sustained and verifiable stability is established.

Employee Safety and Operational Status:

Employee safety remains our highest priority. All Pentagon employees in the affected areas remain safe. Return to work protocols have been implemented at all sites in the Middle East whilst closely monitoring local authority guidance and adhering to all safety protocols.

Global Energy Impact and Carrier Surcharges (Air & Ocean):

Global energy markets remain under pressure despite early de-escalation signals. Oil price volatility continues, driven by uncertainty around critical maritime corridors, particularly the Strait of Hormuz.

All major carriers continue to maintain and expand cost recovery measures globally, including:

• Emergency Fuel Surcharges and Emergency Bunker Adjustment Factors (EBAF)
• War Risk, Security, Congestion, and Market Disruption surcharges
• Peak-type surcharges and general rate increases

These measures continue to reflect:

• Reduced effective capacity due to rerouting and extended transit times
• Elevated insurance and war risk premiums
• Persistent congestion and equipment imbalances
• Increased operational complexity and security requirements

In addition, inland transportation and handling-related surcharges are increasingly being adjusted across regions, reflecting higher fuel costs and operational disruption at origin and destination. It is important to highlight that carriers are expected to adjust these surcharges down only gradually, as underlying cost pressures and network disruptions will take time to normalize.

Air Freight – Current Impact and Global Implications:

Air freight conditions remain constrained, with only partial and gradual capacity recovery.

Current conditions include:

• Reduced but slowly improving capacity to/from the Middle East
• Continued schedule volatility and last-minute changes
• Payload restrictions due to longer routings and fuel considerations
• Ongoing risk of delays and backlog recovery

While some Gulf hub capacity is being reinstated, significant volumes continue to be rerouted via alternative hubs, sustaining:

• Pressure on global air freight capacity
• Congestion at key alternative gateways
• Elevated rate levels

Middle East Airport Updates

Ocean Freight – Current Impact and Maritime Developments:

Ocean freight remains significantly disrupted, with recovery expected to be gradual and operationally complex.

Recent direct carrier feedback highlights:

• Strait of Hormuz transits remain reduced by more than 90%, with most carriers not yet resuming passage
• Carriers are maintaining a strict safety-first approach, prioritizing crew and cargo security before resuming normal routing
• Decisions on broader network normalization are expected in the coming days but remain uncertain

A critical factor impacting recovery:

• Approximately 1,000 merchant vessels remain delayed or “out of position” in the Persian Gulf
• The sequencing and repositioning of these vessels alone will take several weeks, even under stable conditions

Operationally, carriers continue to:

• Avoid high-risk areas and maintain alternative routings
• Utilize Cape of Good Hope diversions, regional hubs, and feeder networks
• Apply strict booking controls depending on trade lane and risk exposure

As a result, the market continues to experience:

• Extended transit times
• Reduced effective vessel and equipment availability
• Ongoing congestion across key hubs

Strait of Hormuz – Ongoing Risk and Managed Transit

Transit through the Strait of Hormuz remains highly restricted and conditional. While authorities have indicated that passage may be possible under certain conditions, carriers confirm that:

• Most are not resuming transit until security conditions are fully assured
• Policies vary by carrier and are subject to rapid change

This remains one of the most critical risk points for global trade and energy flows.

Cost Environment – Structural Pressure and Delayed Normalization

Cost levels across the supply chain remain elevated and are expected to remain so in the near term.

Carriers report continued increases driven by:

• Bunker and fuel costs
• War risk and insurance premiums
• Rerouting and network adjustments
• Inland transportation and handling costs

What This Means for Your Shipments

• Shipments may still face delays, diversions, or revised routing
• Backlog clearance and vessel repositioning will impact schedules in the coming weeks
• Storage and flexible routing solutions remain key mitigation tools
• Additional surcharges, including inland-related adjustments, may apply depending on routing and location

Ocean Freight – War Risk and Emergency BAF

• Carriers continue to apply War Risk Surcharges and Emergency BAFs
• Carriers maintain expanded surcharge structures globally

These reflect fuel, insurance, rerouting, and operational cost increases across the full logistics chain.

Middle East Port Updates

Inland Transportation

Inland transportation continues to be impacted globally by:

• Elevated fuel costs
• Network disruption and congestion
• Equipment and driver imbalances

Customers should expect continued adjustments in trucking, rail, and feeder-related charges. Within the Middle East in addition to rising fuel costs there is dramatic increased demand for trucks given the increase in cross border trucking involved in multi modal ocean transits, intra GCC border crossings are also congested causing delays.

Pentagon Mitigation Measures and Customer Guidance:

Pentagon remains fully mobilized globally to:

• Monitor developments in real time through direct carrier engagement
• Deploy alternative and multimodal routing solutions
• Support backlog management and recovery planning
• Secure capacity for critical shipments

Recommended customer actions:

• Share updated forecasts regularly
• Confirm bookings as early as possible
• Review insurance coverage, including war risk
• Consider flexible routing and transit options
• Plan for continued volatility in transit times and costs

We strongly recommend remaining in close contact with your Pentagon account representative to assess shipment-specific risks, routing alternatives, and cost implications. While early signs of stabilization are emerging, the situation remains highly dynamic, and recovery will take time, particularly as networks are rebalanced and backlog is cleared.

Pentagon will continue to monitor developments closely and provide further updates. Your supply chain continuity—and the safety of our people—remain our top priorities.

Your supply chain continuity—and the safety of our people—remain our top priorities.

Yours Sincerely,

Pentagon Middle East & India Management Team.