Import businesses have felt the impact as rerouted cargo vessels clog unprepared African ports, tying up inventory.
Asset-light corporations are becoming asset-heavier organizations as the on-again, off-again closure of the Strait of Hormuz continues to disrupt global supply chains.
During the 30 days preceding Aug. 17, an average of 16.9 ships passed through the Strait transporting 2.2 million barrels of crude and 380,000 barrels of petrochemicals, as reported by The Strait of Hormuz Ship Monitor. By comparison, during the first quarter of 2025, the U.S. Energy Information Administration estimated that 14.2 million barrels and 5.9 million barrels of petroleum products were shipped daily through the waterway — a decrease of approximately 84% and 94%, respectively.
According to the Atlas Institute for International Affairs, the Cape route is becoming the default option for vessels. As a result, import businesses have felt the impact as rerouted cargo vessels clog unprepared African ports, tying up inventory even longer.
Bolstering inventories and increasing liquidity buffers may initially have been a short-term response to the disruption, but industry insiders view the change as permanent.
“Just-in-time has become just-in-case, and that converted inventory is now on the CFO’s balance sheet,” John Stevens, senior vice president and global head of financial institutions and working capital at Kybira, told Global Finance. ”Higher [days inventory outstanding] stretches the cash conversion cycle and that cash has to come from somewhere: You borrow it or extend supplier terms.”
Adding Days
According to the authors of Allianz Trade’s Days Sales Outstanding (DSO) & Cash Collection Cycle (CCC) report, published in July, the disruption is expected to add a global average of two days to the CCC in the second half as its effects permeate supply chains.
The authors also expected that the U.S.-Iran conflict would result in a lighter version of the 2022 supply chain shock, little appearing in listed firms’ first-half financials and more tangible in the second half as the disruption permeates supply chains with a lag.
“Electronics, pharmaceuticals, textiles, automotive suppliers, metals and paper face the most direct pressure: already inventory-heavy and running elevated cycles, they have the least room to absorb a further DIO rise without tipping their financing needs into distress territory,” they wrote. “Construction and machinery & equipment carry the largest absolute cycles (approximately 103 days) and are unlikely to escape a broad inventory rebuild. Second, the shock should be partly offset by continued private-sector spending on AI infrastructure and data centers, which supports computers & telecoms and software & IT, keeping a meaningful share of the economy on a compressing or at worst flat trajectory.”
Inventory’s Cost
“Every day of DIO you add is cash pulled out of circulation, and that comes at a premium at current financing costs,” said Stevens. “CFOs should be pricing the free cash flow hits before any DIO build-up.”
Companies should count days and dollars rather than units, he added. “Any universal number, in either units or DIO, is a guess. Transit patterns through the Strait of Hormuz have been highly volatile, with flows falling sharply and recovery remaining uneven.”
There is light at the end of the tunnel — if a company’s balance sheet is large enough.
“Large, investment-grade buyers may be better placed to fund inventory builds, while their mid-market suppliers may not be,” said Stevens. “If payment terms are stretched to fund DIO extensions, the biggest squeeze can land one or two tiers down the value chain. Supply-chain finance can help address that gap when it is structured transparently and appropriately.”
Rob Daly covers fintech and the economy. Contact him at rdaly@gfmag.com.