By Dr Shardul Phadnis, Professor of Operations and Supply Chain Management at ASB
For many, the events of Feb 28, 2026, are emotional and political.
For senior leadership in the corporate world, they are infrastructural.
Feb 28 is not about geopolitics alone. It fundamentally alters the exposure companies face. Four questions matter.
1. What changes immediately?
2. What changes structurally?
3. Why does governance need to adapt?
4. What are the urgent leadership actions?
What Changes Immediately
The fighting in Iran and the Middle East is significant. What matters equally is what follows. About 20% of the global oil and liquified natural gas (LNG) traffic, representing about 7 8% of global energy supply, passes through the Strait of Hormuz, which lies to the south and west of Iran. That traffic has effectively stopped with Iran’s retaliatory missile strikes at the Emirati US allies across the Strait.
The immediate consequences are already visible. The stoppage of crude oil and LNG shipments is driving up energy prices, raising input costs for many companies. This will have secondary effects on demand from businesses and consumers.
Blockage and rerouting at Hormuz affect transit times and compress global shipping capacity. This disrupts operational and tactical plans, which, in asset-heavy industries like chemicals or industrial goods, can extend 12-24 months with production committed several months in advance. When a chokepoint destabilizes, disruptions propagate forward through those commitments. Shipping insurance rates are likely to rise amid higher uncertainty and risk of cargo/vessel loss, propagating cost hikes forward through the supply chain.
How this all plays out for each company depends on its own supply network design and business model. Exposure analysis cannot wait.
What Changes Structurally
The more consequential shift is structural.
Iran has been a consistent US rival throughout the 21st century. President George W. Bush named it as part of the Axis of Evil (with Iraq and North Korea). Iran has continued to engage against the US ally Israel through its support of Hezbollah and Hamas; it has supplied the Russians with drones against Ukraine. The targeted killing of a sitting head of state inside his capital represents a significant escalation in sovereign norms. Whether this triggers wider conflict or not, it alters assumptions about escalation boundaries.
Even if this does not escalate into a broader war, it alters the geopolitical calculus and the perceived boundaries of sovereign escalation. This could reshape the geopolitical dynamics. To avoid a similar fate befalling them, states could rush to form new formal alliances to find safety in numbers. Could China fill an anchor role?
This could also make the US’s own allies wonder if they are completely immune to unprecedented actions that, until now, may not have been written in the rule books. With the Trump administration eyeing Greenland for months now, could the European allies really feel at ease that the US won’t pursue actions that are not in their rule book? And what may they do to create a deterrence against such an action?
Feb 28 marks a turning point in the assumptions underpinning the current global order. It is not immediate fragmentation, but the hardening of geopolitical and economic boundaries.
Senior leadership must now reassess the viability of their business and supply chain infrastructure – and adapt it accordingly.
Why Governance Needs to Adapt
The era of pursuing microscopic accuracy gains through better forecasting models and fine-tuned safety stocks is over. Now is the time to prepare for structural shifts. Companies need to build the capability to (a) systematically and rigorously ask the right and relevant “what-if” questions and (b) create and implement solutions to address them.
Today, an AI model can predict the generic impacts of this event. But it won’t articulate impacts specific to your business or your ideal strategic choices easily (unless you have trained an AI model for your business). And certainly, AI will not get an organization to move in the right direction to enact those choices. To enact, the governance structure needs to change.
The changes are needed in both long-term strategic investments in the organizational and supply chain infrastructure and its short-term operational and tactical orchestration. Building structurally adaptable infrastructure requires governance mechanisms that explicitly value flexibility. Simple payback analyses or probabilistic risk assessments are not enough. The governance mechanisms need to be geared towards clear identification of robust initiatives from contingent ones, based on rigorous assessment of underlying uncertainty.
Short-term operational and tactical planning also needs such flexibility. This typically involves creating multiple pathways to deliver value (in terms of sourcing, inventory, distribution, and routing options) ahead of time. Traditional inventory planning methods, built on probabilistic demand distributions, are not designed to handle structural disruptions. Governance models need to enable preparedness based on robust/contingent analyses of strategic choices with strong qualitative evaluations of vulnerabilities and constraints. A governance mechanism that relies solely on probabilistic analysis is likely to be inadequate.
Urgent Leadership Actions
Urgent Leadership Actions The most important leadership action for a CEO or a COO is to start building an organization that is operationally agile and infrastructurally adaptable. This requires changing mindsets and governance mechanisms. Foresight practices such as scenario planning greatly help achieve both. If this capability does not exist within your organization, it must be developed.
A disciplined scenario planning initiative is one mechanism for building that capability. Using systematic interviews, analysis, and visualization to reveal the team members’ mental models to themselves has tremendous learning benefits for the participants themselves (Research on strategic cognition of executives).
Comparing the insights from firsthand experience against those from the current decision making models can be insightful. Does scenario use reveal new developments or present known ones in a new light? Does it change your executives’ judgment about important long-term decisions? Do they see the benefits of flexibility more clearly? (Research insights from quasi-field experiments)
Go through the scenario process to see what strategic choices it recommends. Then see how your governance mechanisms handle the recommendations. Do they enable flexible investments?
In Closing
My team has been working on a scenario planning project with a large multinational company’s global supply chain team for the past 18 months. With a budget of over $1b, this team handles the company’s logistics, customs and regulations, shipper management, etc., for global transport. This organization’s visionary leader wants to bring scenario planning to the operational and tactical planning levels. The scenarios we delivered were differentiated along geopolitical fragmentation as the key defining axis, with an explicit mention of the Strait of Hormuz.
Our scenario process helped us see the criticality of this chokepoint for the company’s operations last summer. Its operations team is now exploring operational resilience strategies by considering that set of scenarios. The question is not whether such a capability is necessary, but how long you can afford to delay building it.
Dr Shardul Phadnis is a Professor of Operations and Supply Chain Management at the Asia School of Business (ASB). The views expressed are his own and do not represent the official positions of ASB or any affiliated institutions.
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