The Panama Canal has become a new focal point of geopolitical tension as traffic rises amid disruption to shipping through the Strait of Hormuz during the Iran war. The 80-kilometre waterway links the Atlantic and Pacific oceans and is strategically important for global trade. The United States has warned that growing Chinese influence around the canal could threaten trade and security, while China rejects the claim. Panama has reaffirmed its sovereignty and said the canal will remain permanently neutral.

According to the Baltic and International Maritime Council, average daily canal traffic reached 38 vessels by the end of May, up 8 percent from a year earlier and near capacity. In the five weeks after the Iran war began, transits rose 16 percent year on year. Higher demand has lengthened waiting times, intensified competition for booking slots and raised payments for priority passage.

Environmental constraints are also limiting operations. Water levels in Gatun Lake remain below historical averages, and the Panama Canal Authority will reduce permitted daily crossings from 36 to 32 starting September 15, 2026. Panama's Supreme Court earlier ruled the legal framework for CK Hutchison's port concession unconstitutional, further heightening disputes over Chinese-linked port operations near the canal.

The Panama Canal Authority will reduce the number of ships permitted through the strategic waterway from next month after El Niño-related drought lowered water levels. From September 3, daily transits will fall from a maximum of 36 to 34 vessels, before declining further to 32 on September 15. The canal links the Atlantic and Pacific oceans, and the restriction follows lower water levels in two artificial lakes that supply it.

Rainfall in the Panama Canal area was 34 percent below its historical average between May and August. Authorities fear El Niño could reduce rainfall further across Central America. They said lower-than-expected rainfall in the canal’s water-collection area made conservation measures necessary to protect the waterway’s long-term operation and sustainability. Authorities have already reduced the maximum permitted draft for large vessels.

About 5 percent of global maritime trade and nearly 40 percent of US container transport use the canal. Authorities said unbooked ships will face longer waiting times, while nine out of every 10 vessels using the canal are booked in advance. Further restrictions may be imposed depending on rainfall in the coming weeks. The lakes supplying the canal also meet water needs for nearly half of Panama’s 4.2 million people.

The United States has launched a joint military drill with Panama’s police forces to enhance canal security amid growing concerns about China's influence in the region. The operation includes U.S. military helicopters landing at a former American base, with drills continuing through Friday. The exercises fall under a bilateral agreement and have sparked protests in Panama. Former President Trump recently reignited debate by suggesting the U.S. should retake control of the canal, drawing criticism from Panama’s current leadership.

The government of Panama has stated that it will take a strong stance to protect its sovereignty and the Panama Canal. This statement follows reports that former U.S. President Donald Trump has been exploring ways to gain control of the strategic waterway. Previously, the White House directed the military to consider increasing the presence of U.S. troops in Panama, reviewing options from enhanced security cooperation to possible control measures. In response, Panama’s Foreign Minister made it clear that the canal belongs to the people of Panama and will remain under their control.