The Red Sea, a critical global shipping route that carries billions of dollars in trade every day, has been plunged into chaos by a series of attacks from Yemen’s Houthi rebels targeting vessels linked to Western and Israeli interests. As many as a third of ships have suspended operations in the area indefinitely, causing backups and delays with ripple effects for global supply chains.
Escalating Tensions Lead to Disruption
Tensions have been building in the region for months as Houthi forces battling the internationally recognized Yemeni government have increased missile and drone strikes into neighboring Saudi Arabia and vessels traveling through nearby waters. The attacks took a serious turn on January 14, when the Houthis targeted a liquid natural gas tanker connected to Qatar using an unmanned explosive drone boat.
Though the tanker escaped damage, the brazen daytime attack in one of the world’s busiest shipping lanes drew outrage and warnings from maritime authorities. It also prompted military intervention, with Saudi Arabia announcing early on January 15 that it had intercepted and destroyed two Houthi drones headed for the Saudi port of Jazan.
Later that same day, the United States, United Kingdom and Israel coordinated airstrikes taking out Houthi coastal missile batteries and weapons facilities. However, regional experts warn this is unlikely to deter the rebels completely or prevent further shipping disruptions.
“The Houthis have shown they are both willing and able to strike at vessels linked to interests they see as hostile,” explains Kamran Bokhari, director of analytical development at Prospectiva SA. “While the latest Western and Israeli airstrikes may restrict their near-term capabilities somewhat, they will likely continue to target commercial and economic infrastructure connected to their opponents.”
Exodus of Tankers and Cargo Ships Begins
Sure enough, soon after the January 15 strikes, reports emerged of multiple tankers and cargo vessels dropping plans to transit the Red Sea and opting to sail around the southern tip of Africa instead. This longer journey avoids the danger zone but adds significant time and fuel costs to shipping operators’ bottom line.
Data from maritime analytics firm Lloyd’s List shows more than 30% of expected traffic through the narrow Bab Al Mandeb strait at the mouth of the Red Sea has vanished since January 16. Bulk carriers and container ships account for the majority of diversions so far.
|% Traffic Change Jan. 16-19
|Added Journey Time*
*Via Africa route
Clarksons Research estimates the longer detours could add $400,000 per voyage for a standard liquid natural gas tanker and $650,000 for the biggest crude oil tankers.
Besides the safety issues posed by Houthi weapons, ship operators must also consider guidance from insurance underwriters reviewing voyage risk on a daily basis. Reports indicate firms Marsh and Ascot have warned clients to avoid any ships bearing American, British or Israeli ties transiting the Red Sea completely for the time being.
Suez Canal Authority Urges Restraint
Egypt’s Suez Canal Authority, which oversees operation of the vital 120-mile shortcut linking the Mediterranean and Red Seas, has called for calm and freedom of navigation following the unrest. However, data shows traffic through the canal has dropped 15% this week as more ships opt to sail around Africa instead.
Vessel queue times have stretched to over 24 hours outside Port Said waiting to enter the canal. Experts say delays could worsen significantly if the conflict drags on.
“Unlike recent one-off events like Ever Given grounding, this emerging crisis has no clear endpoint and could get worse before it gets better,” explains Sal Mercogliano, associate professor of maritime history at Campbell University.
“Houthi capabilities are increasing week to week, while shipping companies, insurers and flag states show more hesitancy about entering such a fluid conflict zone.”
Economic Impacts Beginning to Materialize
With almost 10% of global trade moving through the Suez Canal and past the Horn of Africa annually, economists caution the shipping standstill could drag on recovering economies if it continues.
Supply chain managers, still reeling from the lingering effects of the coronavirus pandemic, now face shortages, delays and skyrocketing transportation costs on a huge range of finished goods and commodities from the impact to Red Sea transit alone.
Hardest hit industries so far include:
Manufacturing – factories in Asia and Europe report shortfalls on key imported components and raw materials arriving from the Middle East and Africa just as post-pandemic demand rebounds.
Food and commodities – agricultural commodity prices have spiked due to nerves over potential fertilizer and animal feed delays from the Black Sea region compounded by the added transport costs.
Energy and chemicals – petroleum producers struggle to reroute huge crude oil shipments to alternate ports in Egypt, Israel and Southern Europe. Reports indicate spot liquefied natural gas cargoes are now avoiding the Suez Canal outright due to security worries.
“Our economists estimate every month the Red Sea remains partially blocked could shave 0.3 percentage points or more off annual GDP for the European Union and key Asian markets like China and India,” says Dubai-based consultancy Geoswift Advisors CEO Stuart Reid.
Reid believes the situation is untenable and will force greater international pressure on Yemen combatants to stand down before long. Others point out key players like the United States now have significant incentive to broker a cease fire allowing safe shipping passage to resume.
No Easy Solutions on the Horizon
Unfortunately, bringing stability to a long, bitter Yemeni conflict clouded by competing interests is easier said than done. The country remains fractured among Houthi rebel forces, Saudi-backed government loyalists, southern separatists, Al-Qaeda militants and remnants of the former regime following years of turmoil.
United Nations led peace talks have failed to secure lasting accords despite some progress. However, with the shipping disruptions now imposing substantial costs on regional players like Egypt, Israel and Gulf energy producers, negotiations may take on renewed urgency.
In the meantime, the waters at the mouth of the Red Sea and adjoining Gulfs of Suez and Aqaba remain filled with uncertainty. The U.S. Navy’s Bahrain-based Fifth Fleet has dispatched several warships to patrol for threats. Though hopes are conflict can be avoided, the potential for clashes between proxy forces and trigger-happy young Houthi recruits keeps tensions high.
Vessel operators, insurers and commodity traders will continue planning expensive, inefficient detours while watching for the first signs of a break in the turmoil allowing navigation to normalize once more.
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