* South Asia-Europe rates up 70% since start of Iran war

- Freightos ( CRGO )

* More than 100 container ships blocked in Strait of

Hormuz

* Some Indian generic drugmakers switching from sea

freight to air, industry expert says

By Allison Lampert and Lisa Baertlein

March 13 (Reuters) - Air freight rates have risen by as

much as 70% on some routes since the start of the U.S.-Israeli

war on Iran, data shows, as the conflict limits flights, blocks

some ocean shipments and pushes up jet fuel costs.

Rates on routes between South Asia and Europe have been the

most affected by Middle Eastern airspace closures and security

issues, industry experts said, after the conflict has stranded

more than 100 container ships in the area around the critical

Strait of Hormuz oil export corridor.

Products like inexpensive generic medicines from India

destined for the European Union, Africa and some Arab countries

like Saudi Arabia and the United Arab Emirates typically move on

container ships through the strait, said pharmaceutical supply

chain expert Prashant Yadav.

"The main shift I've heard about involves companies moving

generic medicines from ocean freight to air cargo," said Yadav,

a senior fellow at the Council on Foreign Relations.

The shift to air cargo is significant because air freight

handles about one-third of global trade by value, making rate

spikes a potential inflationary pressure on goods ranging from

fresh food to pharmaceuticals and electronics.

"Customers are shifting freight from ocean to air, however

it is extremely expensive - typically 5x to 10x higher - and

those costs are climbing as capacity tightens," said Steve

Blough, chief supply chain strategist at logistics software firm

Infios. "More often, shippers are moving a limited quantity by

air to bridge a gap."

JET FUEL PRICE DOUBLES

The jet fuel price has doubled since the start of the conflict,

and Danish container shipping giant Maersk said

this week its own air cargo service is now applying fuel

surcharges and war risk levies.

The airspace closures have also cut cargo capacity in

freighters and passenger planes as airlines take longer routes

to avoid the conflict zone, further pressuring rates.

Dubai and Doha are normally among the world's busiest air

cargo hubs, but operations at those airports have been severely

limited by the Middle Eastern conflict.

Niall van de Wouw, chief air freight officer at

transportation pricing platform Xeneta, attributed higher air

cargo rates to a "dramatic reduction" in capacity at key Middle

East transshipment hubs more than higher fuel prices.

Ronald Lam, the CEO of Hong Kong's Cathay Pacific Airways ( CPCAF )

, said many of its freighter flights to Europe normally

stop in Dubai to refuel and pick up more cargo.

"But because of the situation in Dubai, we're now skipping

that stopover and we are flying direct from Hong Kong to Europe

with some payload restriction, because we couldn't uplift fuel

in between," he said on an earnings call on Wednesday.

According to an air freight index from freight booking and

payments platform Freightos ( CRGO ), off-contract spot rates

from South Asia to Europe have soared 70% to $4.37 per kg from

$2.57 per kg just before the war began. South Asia-North America

rates are up 58% to $6.41 per kg, and Europe-Middle East rates

have risen 55% to $2.79 per kg. A significant share of air cargo

exports from South Asia usually travels through Gulf hubs and

some has had to reroute through East Asia, said Judah Levine,

Freightos' ( CRGO ) head of research.

"That being said, we have seen the price increases on many

of these lanes slow, level off or even decline slightly in the

last couple days," he said.

"These trends may reflect Asian and European carriers adding

capacity to these long-haul lanes to make up for the missing

Gulf capacity, and they may also reflect some of the Gulf

carriers - most importantly Emirates - having restarted

operations and increasing the number of flights that are now

leaving and arriving at these important Gulf hubs."