THE US-Israeli war with Iran has sent shockwaves around the world. As IRJ went to press, an Iranian blockade of the Strait of Hormuz was disrupting the supply of oil from the Middle East, causing the price of Brent crude to surge to more than $US 100 a barrel for the first time since 2022, and creating what some have described as the biggest energy shock in history. The world is also beginning to feel the effects of shortages of other commodities exported from the region, notably liquified natural gas (LNG), urea, aluminium, helium and sulphur.
Persistent Iranian drone attacks on cities, infrastructure and military targets throughout the Gulf emphasise the severity of the conflict. While the US appears to want a swift resolution, it remains unclear as we print this issue how this might be achieved. It could be a long time until the region regains its reputation as a safe and stable place to do business or go on holiday. And with the impact of the Covid-19 pandemic, Russia’s war in Ukraine and the related supply chain and inflation crises continuing to linger, another prolonged shock is the last thing the global economy needs.
The war will inevitably impact the region’s rail sector. The International Association of Public Transport (UITP) swiftly cancelled its Global Summit, which was set to be held in Dubai this month. Dubai’s Roads and Transport Authority (RTA) was due to host the now annual event. RTA, like other transport authorities in the Middle East, has leant heavily on western expertise to develop, build, operate and maintain its rail networks, with expatriates filling important and influential roles in local companies as well as within international groups working in the region. Dubai’s metro is operated by Keolis of France, for example. However, the attractiveness of remaining in the Middle East must now be in question for a great many of these people, potentially robbing these networks of key expertise.
Keolis is also partnering with Etihad Rail to operate its planned passenger service between Abu Dhabi, Dubai and Fujairah. While special trains were put on to transport people unable to travel from Saudi Arabia to the UAE by air in the opening days of the conflict, the official launch of services on the route at some point in 2026 must now be in doubt.
In the longer term, the war could hurt the development and delivery of a number of mainline, high-speed and transit projects across the Middle East, which we have regularly identified as a global industry hotspot. While it is too early to assess the impact, a parallel might be drawn with the oil crisis of 2014-2016, which prompted governments across the region to suspend work on major rail projects, including the GCC network between each of the six Gulf States and Saudi Arabia’s Landbridge to connect Damman, Riyadh and Jeddah by rail. Ironically, if these lines were already operational, they could have offered a high-capacity alternative to moving goods through the Strait of Hormuz, potentially easing the current crisis.
Further afield, the crisis could distract governments from providing funding for new infrastructure projects, particularly in Asia where countries such as India, Japan and Korea are now heavily exposed by their over-reliance on imported energy from the Middle East. Smaller countries with weak economies are also extremely vulnerable to the increasing price of oil.
European governments are facing similar dilemmas in an already difficult economic environment. The Gulf conflict also brings discussions about improving the continent’s infrastructure to enhance the transport of military equipment further to the fore. The European Commission (EC) is targeting the development of a “Military Schengen,” with its military mobility package announced in November 2025 identifying 500 hotspot projects to remove bottlenecks on key corridors.
The package calls for an allocation of €17.65bn from the proposed Connecting Europe Facility (CEF), the European Union’s (EU) transport grant funding programme, for 2028-2034. This figure might now grow in line with increasing security concerns, with the wider industry lobbying for a €100bn CEF budget (p8). Yet there are fears that with only so much money to go around, important TEN-T projects that may lack military mobility importance, including in Portugal, might be overlooked.
The security of infrastructure is another major talking point. Railways are an obvious target for cyber criminals, with some notable vulnerabilities in key systems that can disrupt services and compromise user data exposed on an increasingly regular basis. The need to address these vulnerabilities through enhanced cybersecurity is heightened by the current geopolitical climate. Indeed, the Center for Critical Infrastructure Protection in the United States argues that infrastructure security and network safety are now inextricably linked.
North America’s rail freight market is already feeling the impact of events in the Middle East. The cost of diesel has risen to more than $US 3.80 a gallon, increasing costs but also improving rail’s competitiveness with road hauliers. The surging cost of LNG has also helped to boost coal traffic on US railways. Yet these upturns could soon be countered as global shipping disruption plays out, while a potential worldwide shortage of fertiliser could impact crop yields later in the year, hurting freight traffic.
Such volatility does little to help the rail industry in North America, which is already suffering from the uncertainty caused by the Trump administration’s tariff programme. In Europe, industry leaders are scrambling to support their members by calling for greater protection from the perceived security threat posed by suppliers from potentially hostile countries.
While the full ramifications of recent events are not yet clear, and seemingly changing by the day, it appears that in a decade defined by crises we are entering yet another period of global economic instability. Things may get a little bumpy in the coming months.
