Supply chain issues at Strait of Hormuz

Let's talk Strait of Hormuz. It's been a major sticking point in negotiations between the US and Iran. And just yesterday, President Trump said nobody's going to control the waterway. But really, Iran at this moment controls the waterway. Traffic in the Strait has been, of course, severely limited, and more than 1,000 ships and their crews have been stranded in the Persian Gulf. Professor Nick Vyas joins us now. He is the founding executive director of the USC Marshall Randall R. Kendrick Global Supply Chain Institute. Thanks so much for joining us, Professor. My pleasure. So we've watched the situation in the Strait of Hormuz, and we've now seen gas prices climb for weeks. Let's talk about how this has impacted the US supply chain. So if you think about it, a year ago, the dominant risk was the tariff. That's all we talked about, how that's going to impact the global economy. Today we're reflecting on the Strait of Hormuz, a 20-mile-long waterways driving the energy freight, inflation-- you just talked about it-- and the growth, global growth, all at once. So I think what I call this span of economic time for us is a shadow of war. So I think that small stretch is really becoming a choke point for us. CO-ANCHOR: Hmm, no, I would completely agree. I mean, so I cover the space, and something that the people always ask me are like, OK, so if the war ended tomorrow, how quickly is this all going to be fixed? Because, I mean, things don't just, boom, happen, restart overnight, whether we're talking about the Strait of Hormuz or oil fields that have been shut down or fertilizer that hasn't reached farmers that are planting right now. So what would be your answer on that timing question? Well, the reopening, in my view, is not just a flip of a switch. I mean, it's a start of a queue. I mean, you talk about thousands of ship. It's going to process-- it's going to take weeks, if not months before we start to see the harmonized flow, prewar flow, coming in and out of the Hormuz.

So how can-- I mean, the problem is, of course, that people are feeling the pain in real time. Consumers are feeling pain in real time. How are they to navigate this situation? I mean, you're essentially asking people-- people are paying a lot more for the things that used to cost a few dollars less, and wages are not meeting the moment. You're absolutely right. So let's look at this from the US perspective first. We're energy-independent. So only shock that we're seeing at the gas station-- price of gas at the pump-- we're now seeing trickling down to the grocery stores the food, primarily food. But think about this now. Let's zoom out for a second into the emerging and developing economy. There, 45% of the [INAUDIBLE] spend in the lower-income consumer, and we're talking about closer to a billion people. 45% of their income is devoted to the food and energy. So they're feeling a lot bigger shocks. So I think what we're seeing now, that this crisis, the Iran war, is now spreading much more in a spectrum in terms of the pain and what its impacts is across the world. So we're seeing domestically the inflation number we just saw, the discretionary spending being a concern, and even consumer confidence being somewhat shaken up in our country. But the impact even in a greater degree is globally felt. Nic Vyas, really great analysis. We appreciate you. Thank you very much.