The Red Sea Attacks: A Threat to Global Trade

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The attacks on commercial ships in the Red Sea by Yemen’s Houthi rebels have rerouted a majority of global trade away from the crucial maritime artery for consumer goods and energy supplies, a shift expected to trigger delays and rising prices.

The Houthis are Iranian-backed rebels who seized Yemen’s capital, Sanaa, in 2014, launching a grinding war against a Saudi-led coalition seeking to restore the government. The Houthis have sporadically targeted ships in the region, but the attacks have increased since the start of the Israel-Hamas war. They have used drones and anti-ship missiles to attack vessels and in one case used a helicopter to board and seize an Israeli-owned ship and its crew.

The Red Sea has the Suez Canal at its northern end and the narrow Bab el-Mandeb Strait at the southern end leading into the Gulf of Aden. It’s a busy waterway with ships traversing the Suez Canal to bring goods between Asia and Europe and beyond. In fact, 40% of Asia-Europe trade normally goes through the area, including a huge amount of energy supplies like oil and diesel fuel for import-dependent Europe.

The attacks have led to some of the world’s largest container shipping companies and oil giant BP sending vessels on longer journeys that bypass the Red Sea. That adds what analysts say could be a week to two weeks to voyages. Shippers amounting to 62% of global capacity are opting for the longer route, according to Freightos. That’s lead the number of vessels moving through the Red Sea to drop by more than 40% in a week, said Project44, a tech company whose platform helps companies track shipments.

 London-based BP also that it has “decided to temporarily pause all transits through the Red Sea,” including shipments of oil, liquid natural gas and other energy supplies. The impact will be longer transit times, more fuel spent, more ships required, potential disruption and delays — at least in the first arrivals in Europe. The U.S. and a host of other nations have created a new force to protect ships.