As missiles fly across the Middle East and shipping routes are thrown into doubt, the trade credit market is watching closely – but not panicking yet.
John Middleton (pictured), vice president, complex risk – trade credit at HUB International, says it’s far too early to quantify the fallout of the Iran conflict, even though nerves are clearly frayed.
“It’s way too early to tell what’s going to happen or how long this is going to go, but certainly everyone’s on high alert,” he said. “It’s too early to see it in trade credit yet. A lot depends on how long this goes on and what happens to the price of oil.”
For now, the direct impact on Canadian exporters’ receivables appears limited. But Middleton argues the trade credit community has a clear set of early warning indicators – and oil prices are usually at the top of the list.
“If oil goes north of a hundred dollars a barrel and that tips the global economy into hardship or recession, then you’d expect more claims and more scrutiny by the underwriters,” he noted.
In that scenario, the pressure wouldn’t be confined to the Middle East. A global slowdown would raise insolvency risk across a range of sectors and regions, and trade credit insurers would respond in familiar ways: tightening limits, adjusting country and buyer appetites, and interrogating payment behaviour more closely.
“If this drags on and there’s a real risk of recession, then you’re looking at a higher risk of insolvencies globally, and that will create more demand for trade credit insurance,” Middleton said.
While financial contagion is a medium-term concern, immediate attention is focused on the physical chokepoints that underpin global trade. The Strait of Hormuz – already a flashpoint in previous Iran–West stand‑offs – is once again in the spotlight.
“Iran is trying to shut down the ability of ships to travel through the Strait of Hormuz. That could force companies moving product from Asia to North America or Europe to go down around the Cape of Good Hope, and that’s going to create delays,” Middleton says.
Rerouting around Africa adds weeks to transit times, increases fuel and charter costs, and reshuffles arrival patterns at congested ports. Even companies far from the region can feel the knock‑on effects.
“You’re going to see timing issues on when shipments arrive, logistics problems for the shipping companies,” he adds. “The real risk here is supply chain disruption – and then you have to ask how that ultimately feeds into companies’ ability to pay.”
For trade credit underwriters, the problem is less about a single high-profile incident than the cumulative strain: buyers whose inventory is delayed, sales cycles that lengthen, and working capital that gets squeezed as goods sit on the water or in the wrong place.
The credit picture also shifts when major importers find their energy supplies constrained. From Middleton’s vantage point, several key Asian economies could find themselves under closer scrutiny if the conflict significantly disrupts Middle Eastern exports.
“If you look purely at the oil side, I understand China, India, Japan and South Korea are heavily reliant on the Middle East for oil supply,” he says. “If those countries see a reduction in supply and don’t have adequate reserves, it could affect their ability as economies to function – and that may mean a higher risk of payment problems there.”
That doesn’t mean insurers will suddenly walk away from those markets. Rather, buyers in more exposed sectors – heavy industry, chemicals, energy‑intensive manufacturing and shipping – could face tighter limits or more conservative underwriting if energy shocks begin to bite.
One distinction Middleton is keen to underline is how trade credit policies respond to war compared with some other specialty lines. In marine or war‑risk insurance, for example, it is common to see seven‑day cancellation clauses that allow underwriters to pull cover rapidly when hostilities erupt.
“I’ve been reading about other policies with seven-day cancellation provisions in the event of war. That’s not the case with trade credit,” he says. “A trade credit underwriter can decide they don’t want to insure certain buyers or countries anymore, but that’s on a go‑forward basis. They don’t just cancel the whole policy mid-term because a war breaks out.”
Existing shipments and outstanding receivables continue to be covered under the agreed terms.
“They can choose to exit a market for future shipments, but they don’t walk away from what’s already been written,” Middleton emphasizes.
For policyholders, that structure can provide a measure of stability in a volatile news cycle. Even if underwriters become more selective on new business, cover for past deliveries remains in place, subject to the policy’s political risk and war exclusions.
All of this reinforces Middleton’s view that the current crisis is exactly the kind of environment where experienced trade credit intermediaries can earn their keep.
“I think this is a classic example of where trade credit specialists can bring some real value,” he says.
That value ranges from monitoring country and sector developments in real time, to helping exporters understand how sanctions, shipping disruption and macroeconomic stress could alter the risk profile of their buyers – and how their policies might respond if payments stop flowing.
For now, the Iran conflict is a series of red flags on the horizon rather than a fully fledged trade credit event. But if oil spikes, shipping lanes remain compromised and recession fears harden, Middleton expects both demand for protection – and underwriters’ attention – to rise sharply.
