The recent disruption in the Strait of Hormuz has cast into sharp relief a broader dynamic rising to the top of global focus in recent years: Pressure in the global economic system is not always distributed evenly.
Such tension can readily concentrate in narrow chokepoints—economic dependencies with limited short-term substitutes, in which a single actor, a small coalition of actors, or natural forces could act to alter or restrict the flow of trade or goods through a point or system.
Not all chokepoints are strategically significant: A restricted Strait of Hormuz matters to many countries and organizations; a constrained supply of English willow for cricket bats does not carry the same geopolitical weight.1
But all chokepoints share one very important trait: They can quickly become sources of disruption—and can therefore present both vulnerabilities and opportunities for multinational organizations.
Businesses need to understand exposure, manage risk, and consider opportunities to accelerate investment in resilience, diversification, and innovation when chokepoints—such as the disruption in the Strait of Hormuz or markets for rare earth elements and semiconductors—are pinched. As Lord Mark Sedwill, former UK National Security Adviser and member of McKinsey’s Geopolitical Advisory Council, told us, “The scarring effects on the global economy of most noneconomic shocks are limited and temporary. But when they hit a chokepoint—whether the geopolitical crisis in the Gulf or a drought in Taiwan—the impact is immediate and asymmetric. This is why chokepoint exposure is now a board-level strategic issue.”
In this article, we outline the six categories of chokepoints that companies typically encounter, explore the lessons to leaders from the recent situation in the Strait of Hormuz, and suggest ways executives can better position their companies for the next chokepoint pinch—because it will inevitably emerge. Those who develop a repeatable approach to managing chokepoints will not only be able to act in the moment but will also be better able to manage downside risk and position themselves to capture opportunities while others scramble.
In a pinch: Types of chokepoints
Chokepoints can look very different depending on sector or geography, but they broadly fall into the following six categories:
- Geographic infrastructure. These are the most familiar chokepoints. They can be physical, fixed formations where trade concentrates and there is potential for disruption (such as the Strait of Hormuz, the Panama Canal, or major ports). For instance, in 2021, the container vessel Ever Given ran aground in the Suez Canal, blocking for six days the waterway that carried about 12 percent of global trade at the time. Lloyd’s List estimated the blockage disrupted about $9 billion in trade per day, and Allianz estimated the blockage reduced global annual trade growth by 0.2–0.4 percentage points in 2021.2
- Natural resources and commodities. Naturally occurring critical resource deposits and agricultural climate zones—such as rare earth element deposits or specific climate regions—can create dependency when supply is concentrated. For instance, roughly 60 percent of global cocoa production occurs in Côte d’Ivoire and Ghana. In recent years, rainfall extremes cut output by as much as 40 percent, raising prices fourfold and upending the global cocoa market.3
- Trade network and logistics. Some modern networks and systems are foundational to trade infrastructure and are difficult to bypass, such as maritime insurance, shipping services, ocean trade fleets, or logistics networks. Whereas geographic infrastructure chokepoints include ports and sea lanes, these chokepoints include the services and systems that can limit access to those nodes without physical disruption. For example, in late 2023 and early 2024, when commercial ships were attacked in the Red Sea, premiums for global marine war risk insurance increased by up to 2,700 percent, resulting in Red Sea transits falling by up to 60 percent even after a ceasefire was announced.4
- Financial. These are systems or networks through which vast quantities of capital flow, or that support capital flows that are difficult to bypass. They can create visibility and leverage around transactions. Examples include the US dollar clearing system and the global correspondent banking system. For example, when the Financial Action Task Force (FATF), a small intergovernmental organization combating money laundering, adds countries to its gray or black lists, it signals that correspondent banks should exercise additional diligence, which can lead to relationship restrictions or termination. International Monetary Fund and Center for Global Development research found that between 2000 and 2017, countries added to the FATF gray list saw capital inflows fall by 7.6 percent of GDP, foreign direct investment fall by 3 percent of GDP, and the number of payments received from the rest of the world fall by 10 percent. While this action can incentivize countries and institutions to strengthen anti–money laundering regimes, it could also present a challenge to financial flows for organizations operating in those countries as correspondent banks strengthen diligence.5
- Technology and knowledge. Concentrations of critical technologies or associated intellectual property—such as rare earth element refining, semiconductor lithography, or cloud platform ownership—can create challenges and disruption. For instance, about 90 percent of rare earth element separation and 94 percent of rare earth-based industrial magnet production is in Mainland China. Export controls, such as a suite of 2010 restrictions that pushed terbium prices seven times higher and dysprosium prices 20 times higher, can challenge value chains worldwide.6 Semiconductors are another oft-referenced chokepoint, with just a few companies holding significant shares over several segments of the semiconductor value chain. In 2020, automakers reduced semiconductor orders, and these production runs were allocated to other customers. When auto demand soared in 2021–22, automakers were left short of semiconductors, which delayed or reduced production, resulting in about 13 million fewer light-duty vehicles produced from 2021–23.7
- Regulatory. Government policies and regulatory frameworks—including sanctions, export controls, and compliance requirements—can influence global trade flows and create operational complexity, while also supporting national security, privacy, financial integrity, and other public policy objectives.
In stable times, narrow nodes such as these can help create efficiency and cost savings. During periods of stress, they can become critical points of dependency,amplifying operational and commercial risks.
Lessons from a chokepoint disruption: Strait of Hormuz
Disruption in the Strait of Hormuz provides a contemporary example of chokepoint pinching, with systemic impacts unfolding quickly and widely—and not always evenly, as the following lessons suggest. The impact has been significant: In 2024, the Strait typically carried roughly one-quarter of global seaborne oil trade; amid concentrated disruption in March–May, ship transits fell by about 95 percent from their preconflict baselines.8
Exposure to chokepoints can be asymmetric
The Strait of Hormuz illustrates how disruption does not always cascade equally across the entire system. Even within industries, exposures can vary based on the geographic footprints of individual organizations. Product type, corridor dependence, and other factors can determine the degree of asymmetric exposure. For instance, organizations whose inputs or products flow predominantly through a disrupted chokepoint face higher direct exposure. In this case, buyers of Gulf-supplied liquefied natural gas (LNG) faced acute price increases due to the disruption, while buyers of US-supplied LNG were more insulated.
Another key factor is access (and speed of access) to available alternatives. Organizations that have established a diverse set of suppliers, have flexible logistics contracts that would allow them to switch to alternative transit routes, or deal in higher-margin products that can absorb increased costs can adapt faster or better withstand rapid changes in their supplier or dependency markets.
A third critical differentiator can be policy interventions in home markets. Government strategic reserve releases, emergency allocation schemes, or priority access programs can relieve the impacts of pinched chokepoints for some industries and organizations (as seen, for example, in recent coordinated strategic petroleum reserve releases intended to stabilize energy markets). Effective government relations and home-market policy can quickly address the challenges companies face during a chokepoint pinch.
Second- and third-order effects can rapidly expand the boundaries of disruption
The Strait of Hormuz disruption involves systemic impacts that can spill quickly into downstream markets, such as petrochemicals, jet fuel, and fertilizers; secondary markets, such as metals and agriculture; and tertiary markets, such as semiconductors and consumer prices. In an interconnected economy, systemic shocks can branch widely and unfold rapidly.
Disruption to Gulf energy flows is not limited to oil and gas; it can have significant ripple effects: Reduced hydrocarbon production constrained sulfur joint production output, which in turn tightened sulfuric acid supply. Sulfuric acid is a critical input for phosphate fertilizer and for processing metals such as nickel and copper.9 Effects on energy markets can spread into agricultural and food markets, and to end markets for nickel and copper (such as batteries and electrical systems).
The speed of spillover matters for leaders. Disruption in physical chokepoints tends to materialize first in freight capacity (for example, when ships are idle or rerouted), insurance premiums (maritime insurance premiums rose by as much as 1,000 percent in March 202610) and transit times (for example, the roughly two weeks added to transits as ships were rerouted around the Cape of Good Hope11). Those can be followed by surcharges (such as cost passthroughs on products downstream from petrochemicals), delivery prioritizations (such as precedence given to domestic markets and customers), and force majeure declarations (such as those issued by several energy suppliers to inform customers that contractual obligations may not be met). Many of these emerged within just the first few weeks of the Gulf disruption. By the time the effects of disruption appear as margin erosion or demand destruction, the response window can be significantly narrowed.
The chokepoint playbook: How leaders can position their organizations for success ahead of the next chokepoint pinch
The first move for companies facing potential chokepoint disruptions is to understand chokepoints at a much finer grain than most do today. Supply chain leaders must begin to understand—before competitors do—which constraints really matter. Our research indicates that many still lack true visibility beyond tier-one suppliers and the next five years.12 Chokepoints can hide across all tiers or in service dependencies that are not readily visible, which means it’s incumbent upon leaders to map not only suppliers and production sites but also transport corridors, substitute specifications, inventory cover, and customer-level service commitments.
Strategic options—reroute, replace, or substitute
Even before disruption occurs, leaders should ask themselves the following four questions about their potential exposure to critical chokepoints:
- How exposed am I to this chokepoint? More specifically, what inputs are being purchased, what’s the value of products being sold, which funds are being moved, and so on?
- How much of my exposure could be rerouted if this chokepoint were pinched?
- How much of my exposure could be replaced by other sources if this chokepoint were pinched?
- How much of my exposure could I replace with a substitute product if the chokepoint were pinched?
Leaders can use this rerouting, replacement, and substitution lens to separate inconvenience from strategic vulnerability and identify where proactive choices could create opportunity. There are some instances where it may not be possible to reroute, replace, or substitute—for instance, rare earth magnets, some chip-manufacturing inputs, or a major energy corridor pinched during conflict.
How rerouting, replacing, and substitution can lead to opportunities
In many cases, depending on sector and geography, chokepoints can also accelerate the opportunities to invest in resilience, diversification, and innovations. Organizations that have done so can be well positioned to fill gaps when other organizations begin to apply the reroute, replace, substitute lens.
In late 2023 and early 2024, when commercial ships were attacked in the Red Sea, shipping company Maersk quickly rerouted all of its traffic on Red Sea routes around Africa’s Cape of Good Hope. This flexibility, along with additional capacity and faster sailing, allowed them to maintain their network to meet strong container market volumes, and saw EBIT rise 65 percent to $6.5 billion from 2023 to 2024, well above initial forecasts.13
Building the capabilities to act during chokepoint pinches
After they have asked themselves critical questions regarding current exposures to chokepoints, leaders can use the answers to build the core capabilities needed to adapt to an era in which chokepoints can be pinched at any time. This includes five steps:
- Identify scenarios. Leaders can identify and model thorough chokepoint pinch scenarios to understand how disruptions could unfold and which effects could be most relevant to their organizations. Analyses of scenarios should include identifying third- or fourth-order effects that may not materialize for weeks. Assessments should also consider the value at stake for the organization, including estimates of revenue, working capital needs, compliance, and effects on customers across scenarios.
- Create playbooks. Using these scenarios, organizations can develop playbooks to operationalize responses—complete with action owners, cost estimates, prescribed actions, trigger thresholds, and decision rights. Leaders can make more accurate, real-time decisions with this understanding of the value at stake in each scenario, the estimated cost required to execute a response, and the range of available levers.
- Monitor. Organizations can establish a framework for monitoring chokepoints, using defined metrics, thresholds, and real-time data sources to track when each scenario is becoming reality. Establishing an up-to-the-moment understanding of chokepoint status is a prerequisite for assessing when to activate playbooks in response to disruption.
- Build agility. Leaders can stand up a cross-functional nerve center to manage the organization’s assessment and response. This team—often integrated across risk management, supply chain, compliance, operations, and other functions—can provide rapid analysis and decision-making, develop and execute on frameworks for monitoring chokepoint pinches and other disruptions, maintain and update scenarios and playbooks, and take on tasks that are often performed disparately across the organization. Having such a nerve center in place can make all the difference in an organization’s ability to respond effectively and rapidly to disruption.14 Indeed, it can be the building block for an agile organization—one with the speed and flexibility to adapt and ensure business continuity in a world defined by chokepoint pinches.
- Rehearse. After establishing scenarios and playbooks, organizations can regularly rehearse and update their scenarios and playbooks by having leadership conduct table-top simulation exercises that will allow them to build their quick-response muscle. The nerve center team can orchestrate these sessions and update responses based on the simulations’ findings.
Closing the loop: Feeding learnings from scenarios and playbooks into strategic choices
With the results of playbook development and tabletop exercises in hand, leaders can begin to make deliberate strategic choices that position their organizations to capture opportunity and reroute, replace, and substitute their chokepoint exposure ahead of time. Actions may address one or multiple chokepoint pinches at once, and can generally take four forms:
- Actively diversify operations away from high-concentration chokepoints before disruption. Positioning supply chains, production, and logistics away from high-risk or high-concentration chokepoints at the outset can reduce vulnerability while also expanding optionality when competitors are disrupted.
- Consider substitution or replacement plays in capital plans. Chokepoints often accelerate demand for substitutes, from energy sources to material substitutions. Organizations that are already positioned in these substitution spaces, or are willing to invest ahead of disruption, can capture opportunity as other buyers scramble for alternatives.
- Solidify long-term contracts and preferred customer relationships. Disruption can create urgency that shortens buyer decision cycles. Organizations with available or flexible supply can be in a position to offer long-term commitments to customers seeking stability.
- Build or reinforce access to constrained nodes. Strategic investments (for example, port capacity, pipeline access, or raw material off-take agreements) and public–private partnerships (such as joint ventures in public policy priority sectors) can help establish increased access to chokepoints, converting a structural constraint into a stable asset.
Defining and making choices about where to place limited capacity, which customers to prioritize, which substitutes to back, and where to build access before scarcity intensifies can help an organization position itself for sustained success.
When chokepoints are pinched: Differentiating near- and far-term chokepoint consequences
When chokepoint disruption occurs, it’s crucial for leaders to assess the likely duration of the disruption. Not all chokepoint pinches are long-lasting or permanent. Some resolve within weeks, as markets adapt and geopolitical tensions change. Others may signal a structural realignment of trade that is unlikely to reverse upon chokepoint normalization. This distinction has strategic implications: Treating a structural shift as merely temporary can leave an organization flat-footed as trade permanently rewires, while overinvesting in permanent hedges to counter a temporary disruption may lock in costs that prove uncompetitive when normalcy returns.
In response to any significant chokepoint pinch, leaders should consider whether the underlying geopolitical driver is durable or transient, whether alternative sources and supplies that emerge will remain viable after normalization, and whether competitors are locking in permanent diversification or covering short-term gaps. Leaders who develop a clear understanding of the distinctions between temporary versus structural dynamics will be better positioned to calibrate tactical and strategic responses and avoid the twin errors of underreacting to structural change or overengineering responses to temporary shocks.
The Strait of Hormuz disruption presents an object lesson. While the current disruption is significant, the longer-term question is whether trade routes are being permanently rewired or if flows will largely revert to prior patterns. Questions remain about how second- and third-order effects could unfold and whether adaptations could become permanent. Energy disruption could accelerate diversification and electrification.15 Disruption in the supply of sulfur and urea fertilizers could reduce agricultural yields and drive up global food prices.16 Trade in energy and other goods in the Gulf region could, as some analysts say, durably shift to ports on the Red Sea, the Gulf of Aden outside the Strait, or overland routes toward the Mediterranean and Europe.17 There are indications that these changes were initiated during the disruption and could continue even if ship traffic through the Strait of Hormuz normalizes to previous levels.18 Leaders who best judge the durability of these changes can calibrate responses and position their organizations for long-term success.
Strategic implications for a chokepoint-shaped world
Over the longer term, adapting to a world shaped by chokepoints cannot mean simply carrying more inventory. The larger strategic mission is for organizations to redesign networks around the chokepoints that matter most and shape where they could have sustainable access. This effort could include dual or multiple sourcing, selective regionalization, deliberate production duplication for a handful of critical modules, and structured partnerships that enable access when markets tighten.
Partnerships, including public–private partnerships, can align interests to enable bilateral efforts to address chokepoint disruptions—particularly physical chokepoints. Capacity reservations, long-term shipping arrangements, and co-investment can all improve access to constrained nodes. Similarly, in procurement, leaders can scrutinize force majeure definitions, allocation rights, pass-through mechanisms, and rights to shift production across jurisdictions. In an era of chokepoints, contract architecture can become a core component of resilience strategy.
Chokepoints are not anomalies that exist beyond the bounds of the global economy; they are increasingly one of the ways the global economy is shaped. Trade continues to grow, and growth is being rerouted through more conditional and challenged corridors. Leaders can look to move beyond generic resilience and adopt a more precise discipline: identify where the organization depends on chokepoints; quantify the value at stake; determine whether exposure can be rerouted, replaced, or substituted; and decide where to build optionality before disruption strikes.
